Stocks have rebounded in the last few trading days of 2023 and finished close to new record highs.
The so-called Santa Claus rally has arrived. Thanks to the potential for the Fed to cut rates, investors have flooded into both growth and fixed-income assets – a trend that continued into this shortened trading week. With the Christmas holiday and Monday’s market closure, data on the week was light. Initial jobless claims for the week ending December 23 came in slightly higher than expected at 218,000. Year-over-year pending home sales in November were also better than expected, showing a 5.2% decline vs a 6% dip expected by analysts. However, several regional manufacturing indexes- such as the Dallas and Richmond Fed- showed declines that were larger than forecasted. These trends highlight the need for rate cuts, but also show a weakening economy. Finally, the litany of energy data also painted a moderately bearish picture in the shortened week.
Despite the market closure on Monday for the New Year’s Day celebration, there will be some important economic data revealed next week. This includes the latest FOMC meeting minutes on Wednesday. The central bank has continued to hit pause on rate hikes and even suggested that cuts could be in the cards next year as economic growth starts to slow and inflation is tamed. With that, investors will be looking at the minutes to see if the Fed mentions anything in terms of additional timing for these cuts. The rest of the week’s light data will focus on the labor economy. On Wednesday, the JOLTS report is expected to show an approximately 8.8 million jobs available in November, marginally higher than 8.73 million reported in October. Likewise, ADP’s employment report for December is predicted to show a moderately bullish net increase on Thursday. Investors will be looking to see how these numbers affect the Fed’s future decisions. The labor force participation rate, to be revealed on Friday, is expected to be bullish and at highs not seen since the 2000s.
Given this economic backdrop, let us see how this impacts the performance of various investment strategies.
Investment Strategy Scorecard
Overall, the U.S. stock markets continued their upward trajectory for the rolling month.
Growth focused strategies, including innovative technology, healthcare and small cap strategies continue to post some of the strongest performances over the rolling month. Meanwhile, tactical/concentrated and commodity strategies continued to struggle.
U.S Equity Strategies
Several small-cap growth strategies continue to outperforme their larger counterparts over the trailing month.
Winning
- Wasatch Ultra Growth Fund (WAMCX) , up 19.67%
- iShares Micro-Cap ETF (IWC), up 18.06%
- Franklin Small Cap Growth Fund (FSSAX) , up 16.94%
- iShares S&P Small-Cap 600 Value ETF (IJS), up 15.5%
- iShares Core S&P U.S. Growth ETF (IUSG) , up 4.1%
- Invesco Dynamic Large Cap Growth ETF (PWB), up 4%
Losing
- Mercer US Large Cap Equity Fund (MLCGX) , down -32.16%
- Lazard US Equity Concentrated Portfolio (LEVOX), down -40.33%
Dividend Strategies
Several dividend strategies, including mid/small cap, continue to post strong performances over the rolling month.
Winning
- ProShares Russell 2000 Dividend Growers ETF (SMDV) , up 13.68%
- WisdomTree U.S. SmallCap Dividend Fund (DES), up 12.66%
- Principal Small-MidCap Dividend Income Fund (PMDIX) , up 10.46%
- Pioneer Equity Income Fund (PEQIX), up 6.19%
- iShares Core High Dividend ETF (HDV) , up 3.48%
- SPDR® S&P International Dividend ETF (DWX), up 2.91%
Losing
- Invesco Rising Dividends Fund (ONRDX) , down -2.72%
- Cullen High Dividend Equity Fund (CHDEX), down -3.7%
U.S. Fixed Income Strategies
In US fixed income, long duration bond focused strategies continued to post solid performances over the rolling month.
Winning
- Vanguard Extended Duration Treasury Index Fund (VEDIX) , up 12.87%
- PIMCO StocksPLUS® Long Duration Fund (PSLDX), up 12.07%
- iShares 20+ Year Treasury Bond ETF (TLT) , up 9.07%
- SPDR® Portfolio Long Term Treasury ETF (SPTL), up 8.61%
Losing
- iShares Interest Rate Hedged Corporate Bond ETF (LQDH) , down -0.53%
- GMO Opportunistic Income Fund (GMOLX), down -3.35%
- Calamos Market Neutral Income (CVSIX) , down -3.69%
- ProShares Short 20+ Year Treasury (TBF), down -10.17%
Foreign Equity Strategies
Developing markets, Swedish and Mexican equity strategies continue to outperform Chinese and Taiwanese equity strategies.
Winning
- Lord Abbett Developing Growth Fund (LADVX) , up 13.45%
- Brown Capital Management International Small Company Fund (BCSVX), up 10.7%
- iShares MSCI Sweden ETF (EWD) , up 9.69%
- iShares MSCI Mexico ETF (EWW), up 8.82%
Losing
- Invesco Oppenheimer International Growth Fund (OIGIX) , down -3.96%
- iShares MSCI Taiwan ETF (EWT), down -5.58%
- iShares MSCI China ETF (MCHI) , down -6.45%
- MFS International Intrinsic Value Fund (MGIAX), down -6.98%
Foreign Fixed Income Strategies
Emerging market bond and international treasury strategies continued to post some of the best performances in the foreign fixed income space.
Winning
- John Hancock Funds Emerging Markets Debt Fund (JEMIX) , up 5.53%
- JPMorgan Emerging Markets Debt Fund (JEDAX), up 5.51%
- iShares International Treasury Bond ETF (IGOV) , up 5.46%
- iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB), up 4.23%
- VanEck Emerging Markets High Yield Bond ETF (HYEM) , up 1.7%
- VanEck J.P. Morgan EM Local Currency Bond ETF (EMLC), up 1.12%
- Eaton Vance Emerging Markets Debt Opportunities Fund (EIDOX) , up 0.94%
- Invesco International Bond Fund (OIBIX), up 0.68%
Alternatives
Among alternatives, low volatility and convertible security strategies posted strong results over the rolling month, while managed futures and commodities continued to struggle.
Winning
- Invesco S&P SmallCap Low Volatility ETF (XSLV) , up 10.34%
- Virtus InfraCap U.S. Preferred Stock ETF (PFFA), up 8.4%
- Columbia Convertible Securities Fund (COVRX) , up 7.15%
- Putnam Convertible Securities Fund (PCONX), up 6.6%
Losing
- iShares GSCI Commodity Dynamic Roll Strategy ETF (COMT) , down -7.9%
- Invesco DB Commodity Index Tracking Fund (DBC), down -8.24%
- BlackRock Tactical Opportunities Fund (PCBAX) , down -8.4%
- AQR Managed Futures Strategy Fund (AQMIX), down -10.28%
Sectors
Among the sectors technology and healthcare strategies continue to post strong results heading into the new year, while strategies focused on concentrated bets and oil struggled.
Winning
- Amplify Transformational Data Sharing ETF (BLOK) , up 31.23%
- Eventide Healthcare & Life Sciences Fund (ETAHX), up 24.48%
- SPDR® S&P Biotech ETF (XBI) , up 24.41%
- Franklin Biotechnology Discovery Fund (FTDZX), up 24.13%
Losing
- ProShares Short QQQ (PSQ) , down -6.73%
- Invesco DB Oil Fund (DBO), down -10.7%
- MassMutual Blue Chip Growth Fund (MBCZX) , down -15.4%
- MassMutual Select Blue Chip Growth Fund (MBGFX), down -18.29%
Methodology
Every week, MutualFunds.com provides a snapshot of the performance of some key mutual funds and ETFs to highlight the trending investment strategies across different sectors, geographic regions, asset classes and themes. MutualFunds.com uses a proprietary system to scan through thousands of relevant mutual funds and ETFs. Fund performance data is calculated for the trailing one month, based on the change in NAV.
Here is a summary of the different strategies covered in this article:
- U.S. equity strategies typically cover different equity investing styles (growth/value/blend) and market capitalizations (small/mid/large).
- Dividend strategies focus on generating income via different equity routes (high yield/dividend growth/foreign dividend/quality dividend)
- U.S. fixed income strategies focus on debt securities issued by U.S. entities and can cover different types of debt (corporate/municipal/high-yield/investment-grade/government/asset-backed) and maturity profiles (short/medium/long).
- Foreign equity strategies cover equity strategies applied to non-U.S. markets based on the level of economic growth (emerging/developed), regions (Asia/Europe/Africa), and market capitalizations (small/mid/large).
- Foreign fixed-income strategies focus on debt securities issued outside the U.S. markets and can cover different regions (Asia/Europe/Africa) and regions based on the level of economic development (emerging/developed).
- Alternative strategies cover non-traditional investments (currencies, hedge funds strategies, derivatives, volatility-based), real estate, and commodities.
- Sector strategies cover dedicated exposure to various sectors of the U.S. economy including technology, healthcare, financial, and industrial among others.