It could be a “dead cat bounce”—or maybe, just maybe, the markets have found a bottom. Either way, you have recovered a lot of money last month.
Mutual fund dropped to record levels in January and February but 20 of the 24 fund indices gained 5% or more last month and five of them had double-digit returns.
“Equities rose for the month as U.S. Treasury Secretary Timothy Geithner provided more detail on his government’s proposal to get toxic assets off the balance sheets of large banks, and described plans for new, tougher regulation of capital markets,” says Al Kellett, fund analyst for Morningstar Canada.
Even more remarkable is the comeback in the financial services industry. In Canada, the S&P/TSX Capped Financial Index rose 12.9%, and the Financials sub-index of the S&P500 did even better with a 17.7% gain, according to Kellett.
“Confidence in the financial services sector rose as some of the largest banks in the United States, like Citigroup, Bank of America, and JP Morgan, announced a profitable start to the year,” Kellett says. As a result, the Morningstar Financial Services Equity Fund Index had its best monthly performance in nearly a decade with a gain of 11.1%, tied for second best with the Morningstar Precious Metals Equity Fund Index.
Christine Hughes, manager of one the best performing balance fund of 2008, says that “ Energy is THE buy in 2009, due to oil becoming harder to find and more costly to extract. As the economy improves, demand will rise significantly, particularly in China. Although short-term pressure may exert itself on the price of oil, long term oil will head back towards mid-2008 levels.”
Emerging market equities, especially China, saw a substantial rise in performance last month. Greater China Equity was the top performer among all fund indices in March with a 13.8% gain, reflecting a similar return by the Shanghai Composite Index. Other emerging markets such as Korea, Taiwan, and Mexico also posted double-digit gains contributing to good returns for the Emerging Markets Equity (10.9%) and Asia/Pacific excludingJapan Equity (10.2%) fund indices.
The past month was the first time since January 2007 that all equity fund indices were in positive territory. Among core asset categories, Canadian Equity was up 7.9%, U.S. Equity was up 7.2%, Global Equity, 6.2%, and International Equity, 5.9%.