The top 20 funds so far this year

Natural resource strategies are thriving as inflation and interest rates rise, Saltydog Investor points out.

In the last few months, there has been a shift in the economic landscape. In January, nearly all the major stock markets around the world fell as countries struggled with the Omicron variant of Covid-19. It also became clear that restarting world economies would not be straightforward. Complex supply chains have been disrupted and will take time to put back in place.

There were more losses in February. The table below shows most indices falling. Only the Shanghai Composite and the Brazilian Ibovespa made gains.

Stock market indices

_{Data source: Morningstar. Past performance is not a guide to future performance.}

In March, we saw markets start to recover and most went up – but unfortunately, April has been more mixed. So far this year, the best-performing market index in our table has been the Brazilian Ibovespa. It has gone up by nearly 13%, while most others have made losses.

Apart from the war in Ukraine, the main influence on markets has been rising inflation and the response of central banks. Energy prices have soared as have certain foods, metals and other commodities. Some commentators are suggesting that we may be entering a new commodity super-cycle.

According to the Office for National Statistics (ONS), the UK Consumer Price Index (CPI) rose by 6.2% in the 12 months to February 2022, up from 5.5% in January. In his Spring sSatement, Rishi Sunak said that the Office for Budget Responsibility thought inflation would average 7.4% this year.

The Bank of England has now increased interest rates three times since last December, and they may still go higher.

In the US, the February CPI year-on-year figure was 7.9%, the highest it has been since 1982. Last month, the Federal Reserve raised interest rates for the first time since 2018. They increased the rate only by 0.25% but are expected to put it up several more times this year. They could raise it by 0.5% next time. 

In the last quarter of 2021, the best-performing sectors came from the developed markets, with North America at the top, followed by global equity income. Funds investing in gold and precious metals also featured in our list of leading strategies during the final three months of the year.

In the first three months of this year, the energy and commodity funds have come out on top, along with funds investing in Latin America. Schroder ISF Global Energy is at the top of the table with a 33.7% three-month return.

Top 20 funds in the first quarter

_{Data source: Morningstar. Past performance is not a guide to future performance.}

There are five funds in our latest table that were also in the top 20 for the fourth quarter of 2021. They are the VT Argonaut Absolute Returns fund and the four “gold” funds: SVS Sanlam Global Gold and Natural Resources, Ninety One Global Gold, LF Ruffer Gold, and BlackRock Gold and General.

Our two demonstration portfolios reflect this change in momentum. All the funds we were invested in at the end of last year were sold during January and early February. Since then, we have been sitting on significant levels of cash and have made a few new investments. It probably will not come as a surprise that we are already holding a number of funds that feature in this table. They are Schroder ISF Global Energy, JPM Natural Resources, Liontrust Latin America, TB Guinness Global Energy, and Fidelity American Special Situations.

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