Company earnings in the US have been stronger than expected and inflation has stayed sticky around 3%. And what happens in the US tends to impact global markets.
This has meant shares and gold have kept marching upwards so far in 2024, after a strong end to 2023. Bonds have stumbled though, because of changes in future interest rate expectations.
Here’s how markets did over the quarter and what that’s meant for mixed asset funds. Remember, past performance isn’t a guide to the future.
This article isn’t personal advice. If you’re not sure whether an investment is right for you, ask for financial advice. Investments and any income they produce can fall as well as rise in value, so you could get back less than you invest.
How have stock markets performed?
Shares mostly delivered positive returns over the three months to the end of April, with the MSCI All Country World index growing 5.93%*.
This is a short timeframe though, and past performance isn’t a guide to future returns.
Chinese shares performed well, with the MSCI China index returning 18.63%* during that time. This is after three years of very weak performance from Chinese shares.
However, even with this short period of strong performance, returns over the last 12 months from Chinese shares are still worse than most other places at -6.24%*.
The worst performing index over the last three months was MSCI Japan, which only saw gains of 2.82%*. But these added to stronger recent returns, giving Japanese shares a return over the 12 months to the end April of 20.09%*.
The only region to outperform Japan over this period was the US, The MSCI USA index returned 23.79%*, driven largely by shares in the ‘Magnificent Seven’.
Government bonds are a type of debt instrument where an investor lends money to the government. Most pay a fixed level of interest for the duration of the bond and repay the initial lump sum to the investor when the bond matures. UK government bonds are also known as gilts.
How have bonds performed?
Bonds were more mixed over the last three months. Gilts (government bonds) have been losing money while the riskier high yield corporate bonds have had some positive returns.
Yields have broadly risen (meaning prices fell) over this time. However, the income paid by high yield bonds has been high enough to offset the losses in prices. The lower income paid by government bonds hasn’t been enough to do the same.
Changes in interest rate expectations keep driving bond markets. Initially there were expectations of a lot of rate cuts in 2024. But company earnings in the US have come in stronger than expected and inflation has stopped falling for now. So, the Federal Reserve potentially cutting interest rates soon is less likely.
US monetary policy has a knock-on effect on the potential decisions from other central banks like the Bank of England and the European Central Bank. The current expectations for their rate cuts in 2024 have also simmered. This has caused bond yields to rise and prices to fall.
Returns over the last 12 months have been similar, with the IA £ high yield sector providing the best return of 9.52%* and the IA UK Index Linked Gilt sector -5.44%*.
How have mixed asset and total return funds performed?
Funds invested more in shares than in bonds have seen better returns over the past five years.
Funds in the IA Flexible Investment and IA Mixed Investment 40-85% Shares sectors performed best because they generally invested more in shares.
This trend kept going over the past year. The best performing mixed-asset sector over the last 12 months was the IA Flexible Investment, with returned 9.22%*.
Funds in this sector don’t have a lot of limits on what they can invest in. They tend to be defensively minded and able to change their investments significantly if they want to.
The worst performing sector was the IA Mixed Investment 0-35% Shares sector. The average fund in this sector returned 4.41%*. These funds invest more in bonds which haven’t performed as well as shares over the 12 months.
Annual percentage growth
Apr 19 – Apr 20 | Apr 20 – Apr 21 | Apr 21 – Apr 22 | Apr 22 – Apr 23 | Apr 23 – Apr 24 | |
|---|---|---|---|---|---|
IA £ High Yield | -6.85% | 18.68% | -4.18% | -1.34% | 9.52% |
IA Flexible Investment | -4.44% | 24.54% | -0.59% | -1.33% | 9.22% |
IA Mixed Investment 0-35% Shares | -0.66% | 9.31% | -3.36% | -3.86% | 4.41% |
IA Mixed Investment 20-60% Shares | -3.64% | 16.23% | -1.27% | -2.70% | 6.41% |
IA Mixed Investment 40-85% Shares | -4.02% | 21.51% | -0.04% | -1.81% | 8.67% |
IA Targeted Absolute Return | -1.77% | 9.68% | 1.33% | 0.52% | 6.41% |
IA UK Index Linked Gilt | 9.52% | -2.10% | -2.18% | -26.67% | -5.44% |
MSCI China | 1.40% | 24.94% | -29.55% | -5.75% | -6.24% |
MSCI Japan | 0.65% | 19.33% | -4.14% | 4.62% | 20.09% |
MSCI USA | 4.41% | 35.26% | 8.52% | 1.82% | 23.79% |
How have our Wealth Shortlist funds performed?
Our Wealth Shortlist funds have performed differently over the past 12 months. But with their different approaches and objectives, we don’t expect them to perform the same.
Remember, 12 months is a short time when looking at performance. Investments should be held as part of a diversified portfolio for the long term – that’s at least five years.
Investing in funds isn't right for everyone. Investors should only invest if a fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.
For more details on each fund and its risks, including charges, see the links to their factsheets and key investor information.
BNY Mellon Multi-Asset Balanced
BNY Mellon Multi-Asset Balanced was the strongest performing Wealth Shortlist fund in this sector over the past 12 months. It returned 9.71%**, above its IA Mixed Investment 40-85% peer group average of 8.67%. Remember, past performances isn’t a guide to future returns.
The fund invests in shares, bonds, and cash, but with a focus on shares. The shares part of the fund centres on the US, UK, and Europe. It also invests in higher yield high risk bonds and smaller companies which have higher risk than their larger counterparts.
Over the last 12 months, shares added the most value. With the amount invested in shares, it’s expected this will have the biggest impact on overall fund performance.
Bonds also gained in value, but this lower portion invested in bonds means the gains had less of an impact on overall performance.
The manager can invest in emerging markets and derivatives, both of which add risk.
Troy Trojan
Troy Trojan was the worst performing Wealth Shortlist fund in the sector over the last 12 months, returning 2.90%.
The managers aim to grow investors' money steadily over the long run, while limiting losses when markets fall, instead of trying to shoot the lights out and perform strongly at all times.
It invests in a diversified set of shares, bonds, and gold. While their investments in gold have added value, their shares and bonds haven’t provided much in the way of positive returns. This has resulted in the small positive return over the year.
The managers can invest in smaller companies, which adds risk. While the fund contains a diverse range of investments, it’s concentrated. This means each investment can contribute significantly to overall returns, but it can increase risk.
Annual percentage growth
Apr 19 – Apr 20 | Apr 20 – Apr 21 | Apr 21 – Apr 22 | Apr 22 – Apr 23 | Apr 23 – Apr 24 | |
|---|---|---|---|---|---|
BNY Mellon Multi-Asset Balanced | 1.10% | 20.53% | 7.06% | 3.92% | 9.71% |
IA Mixed Investment 40-85% Shares | -4.02% | 21.51% | -0.04% | -1.81% | 8.67% |
Troy Trojan | 8.60% | 8.36% | 7.96% | -1.44% | 2.90% |
UK Retail Price Index | 1.53% | 2.90% | 11.13% | 11.42% | 2.74% |