When stocks hit an air pocket this week, as is often the case,
hardest hit were the corners of the market that had been leading the
charge higher. In this case, it's been mutual funds focused on growth
stocks that have taken it on the chin, especially those loaded up with
shares of technology companies.
Also suffering larger losses were a number of exchange-traded funds
employing momentum strategies. However, ETFs with dividend strategies
weathered the storm relatively well. We'll look through the market
turmoil with data and tools from Morningstar Cloud.
10 charts that show the market turmoil
Last week's Market Barometer: While the damage was
worse among growth stocks, value—which has lagged behind in recent
years—has also been caught up in the sell-off.
Last month's Market Barometer: For the past month,
small growth's losses have hit correction territory.
Market Barometer—Oct. 11:
On Thursday, it was actually value that fared the
Sector performance: The primary culprit has been
the technology sector, although industrial and basic materials have
suffered big losses amid concerns about rising interest rates and
the impact of the trade war with China.
Last year's Market Barometer: Through the end of
September, small growth had been up in the neighborhood of 25% over
the last 12 months, and large growth wasn't far behind. With the
downdraft, those returns took a haircut. But, by historical return
standards, those categories are still posting big gains for the past
Worst-performing funds over the last week: Diving
down into the damage done among U.S. diversified stock funds,
many—but not all—of the worst performing funds during the two-day
downdraft were funds that had been top performers for the year to
date through the end of September. For all the screens in this
article, we have culled funds with assets under management of less
than $100 million. Looking at the list of worst-performers, for the
most part, a common denominator are significant stakes in technology
stocks (at the end of September, the S&P 500's tech stock
weighting was 21%). None of the funds on this list carries a
Morningstar analyst rating of Gold, Silver or Bronze, and only
three—Lord Abbett Developing Growth, AllianzGI Focused Growth, and
AB Small Cap Growth—are rated Neutral by Morningstar analysts.
Best-performing funds over the last week: On the
winners side (at least on a relative basis) the more-bouyant funds
were those who have been lagging so far in 2018, including
Gold-rated Yacktman and Silver-rated Royce Special Equity.
Worst-performing small-growth funds over the last
week: Here's a look at the damage among Small Growth. Among
those hardest-hit were Gold-rated Brown Capital Management Small
Company, Silver-rated Baron Small Cap, and Bronze-rated Fidelity
Small Cap Growth. Three other funds carry Neutral analyst
Worst-performing ETFs over the last week: Turning
to exchange-traded funds, again the common denominator for the most
part is the big technology stake. Notably, a number of momentum
strategies appear to have been caught wrong-footed by the turn in
Best-performing ETFs over the last week: Dividend
ETFs were buoyed by their utilities and consumer defensive sector
stakes, alongside relatively low tech weightings.
This blog post is adapted from research that was originally
published in Morningstar Direct’s Research Portal. If
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