Jan 04 2010

Mutual Fund Monday – What 2009 Trends Mean for 2010.

Many investors take the change in calendar year as an opportunity to assess their portfolios and the future, and hopefully get their portfolios aligned with the future direction of the stock market. One way in which to do this is to look back on the year that’s passed and see what worked and what didn’t, then ponder whether those trends will continue for the new year, or fizzle out.

Morningstar has a great article on what was hot in 2009, and why.

For starters, what was hot:

4 general categories proved to spear head the market out of panic mode:

  • Emerging markets
  • Small cap stocks
  • Commodities
  • Technology

The hottest single category for the year of all Morningstar categories and asset classes was Latin America stock funds – up 112% for the year. Diversified emerging markets rose 72%, while Pacific/Asia ex-Japan funds were up 69%.

Morningstar attributes these numbers to two factors:

  1. A general sense of relief when investors realized the panic of Q4 2008 – Q1 2009 was overblown and the global financial system wasn’t headed over the abyss. This led investors to dive back into more “adventurous” investments that they had previously fled.
  2. China’s economy showed signs of being more resilient than other economies, leading investors to return to embracing the trend of Chinese growth potential.

One could also argue, though the Morningstar article doesn’t, that the interest in commodities was due to an overall trend of uncertainty about the future caused in large part by un restrained government spending and historic federal deficits. Many people are hedging toward protecting for a possible currency crisis or at the very least, rapid rise in inflation.

Small cap and Tech stocks were hot because those kinds of stocks typically lead an economic recovery, so investors were looking to catch any stock market recovery in the early stages.

Check out the Morningstar article to see more of their reasoning behind the numbers.


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