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What Got Hit Among U.S. Stock Funds?

A look in 10 Morningstar Cloud charts and tables

Tom Lauricella 


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

  1.  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. 
  2. Last month's Market Barometer: For the past month, small growth's losses have hit correction territory. 
  3. Market BarometerOct. 11: On Thursday, it was actually value that fared the worst.
  4. 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.
  5. 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 year.
  6. 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.
  7. 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.
  8. 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 ratings.
  9. 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 the market.
  10.  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 you’re a user, you have access. If not, take a free trial.

Learn how advisors can help guide investors during market volatility by reading our paper “Turning Volatility Into Positivity, Understanding Client Anxiety During Market Swings.”

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