Interactive Investor

Month in the markets: rotation to value stocks slows in April

11th May 2021 17:26

Tom Bailey from interactive investor

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The move from growth to value stocks has slowed over the past month. 

April was mostly a good month for stock markets around the world, thanks to continued optimism for a post-pandemic economic recovery.

The S&P Global BMI, an index of 11,000 stocks from 25 developed and 25 emerging markets, gained 4.3% over the month. The global index has returned 9.77% in price terms since the start of the year.

Of the 50 countries included in the index, 42 saw their equity markets advance during the month.

One strong performer was the S&P 500, which gained 5.3%. This was largely the result of US stimulus measures and stronger than expected corporate earnings. Year-to-date, the US headline index has now appreciated by 11.84%.

The rest of the world also performed well, with the S&P Developed ex-US BMI gaining 3.4%. This index has returned just over 7% since the start of the year.

Europe provided positive returns in April, but lagged the global market, with the S&P Europe 350 appreciating by 2.17%. Since the start of the year, this index has advanced by 11.02%.

Leading the continent in April were Danish and Finnish equities, each up by 7.1%. UK stocks also did well, with the S&P United Kingdom gaining just over 4%. The UK has gained 9.59% since the start of the year.

Despite a resurgence of the pandemic in Brazil and India, emerging markets as a whole saw positive performance, with the S&P Emerging BMI advancing 2.9%. The index has gained 5.79% year-to-date.

Poland was one of emerging markets' stronger performers in April, rising by 9.9%, followed by Greece (9.2%).

Some of the worst emerging market performance came from Latin America, with Chile losing 8.1% and Peru 7.1%. However, despite seeing heavy losses in the final days of April, the region as a whole saw gains in the month, with the S&P Latin America BMI gaining 4.28%. However, the index is still in negative territory measured from the start of the year.

The large surge in coronavirus cases and deaths was reflected in India’s stock market, with the S&P BSE SENSEX declining 1.5% in April.

However, stocks in Asia as a whole saw gains in April, with the S&P Pan Asia BMI up 2% and most single-country indices also clocking gains. Taiwan’s stocks saw a return of 6.72%, followed by Singapore, with 4.86%. Alongside India, Japan was one of two Asian countries to post losses, with the S&P/TOPIX 150 losing 2.69%.

Market rotation over?

Since November 2020, there has been a rotation away from growth and tech stocks to more value and cyclical stocks. That rotation, however, appears to have slowed down in April.

The S&P Global 1200 Communication Services sector, full of very growthy stocks, gained 6.5% in April, making it the best-performing global sector. Meanwhile, the value and cyclical heavy global energy sector gained just 0.52%.

The rebound in growth stocks was pronounced in the US market. The S&P 500 Growth index gained 6.87%, outperforming the S&P 500 Value index, which gained 3.92%. Therefore, in April, growth outperformed the wider benchmark and value underperformed.

However, year-to-date, value was still ahead, having returned 14.9% compared to the 9.14% of growth stocks. Value’s year-to-date performance was also comfortably above the wider market’s year-to-date return of almost 11.84%.

Meanwhile, the S&P 500 Communication Services sector was April’s second best-performing sector, returning 7.85%. Energy returned 0.59%.

The slowdown in value stock improvement can also be seen in the performance of equal weighted indices. Around the world, equal weighted indices performed less well than their market-cap weighted counterparts. Notably, however, the S&P 500 Equal Weight Index underperformed the S&P 500 by 1% in April.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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