Interactive Investor

The sector that dominated the Santa rally

Nearly all sectors rose in the final month of 2023 – but Saltydog Investor found one sector that stood out from the crowd.

8th January 2024 13:57

by Douglas Chadwick from ii contributor

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This content is provided by Saltydog Investor. It is a third-party supplier and not part of interactive investor. It is provided for information only and does not constitute a personal recommendation.

It is not unusual to see a final flourish in the lead up to Christmas and the new year...a Santa rally.

That was certainly the case last year with most of the stock market indices we follow making gains in December. The only exceptions were in the Far East, where the Hang Seng was flat and the Nikkei 225 and Shanghai Composite both went down. This is reflected in our latest sector analysis.

After a disappointing August, September and October, nearly all the Investment Association (IA) sectors that we monitor rose in November and December.

Sectors with positive returns

Past performance is not a guide to future performance.

Only two of the 34 sectors failed to make gains in December. UK Direct Property went down by a mere 0.03%, but China/Greater China lost 2.9%.

The best-performing sector was North American Smaller Companies, up 10.4%, followed by Latin America which made 8%. The UK Smaller Companies and European Smaller Companies sectors were next with a one-month return of 7.1%.

IA sector returns December 2023

Past performance is not a guide to future performance.

There are two sectors that specifically target funds investing in North American companies.

They are North America, for funds which “invest at least 80% of their assets in North American equities”, and North American Smaller Companies, for funds that “invest at least 80% of their assets in North American equities of companies which form the bottom 20% by market capitalisation”.

Because the US market is so large you also tend to find that many of the funds from the Global sector are predominantly invested in US companies, as are the Technology & Technology Innovation funds.

The best-performing funds in December were actually two funds from the Specialist sector. Because the fund objectives and strategies can vary so widely for the funds in this sector, the IA do not publish the overall sector performance, but at Saltydog we do track the performance of the individual funds.

Saltydogs top 10 funds in December 2023

Fund NnameInvestment Association sectorMonthly return
Pictet-BiotechSpecialist17.7
AXA Framlington BiotechSpecialist15.4
Baillie Gifford Global DiscoveryGlobal14.4
FTF Royce US Smaller CompaniesNorth American Smaller Companies12.8
JPM US Small Cap GrowthNorth American Smaller Companies12.1
Liontrust UK EthicalUK All Companies12.0
CT American Smaller CompaniesNorth American Smaller Companies11.2
Schroder US Smaller CompaniesNorth American Smaller Companies11.0
CT US Smaller CompaniesNorth American Smaller Companies10.5
Janus Henderson UK Smaller ComsUK Smaller Companies10.0

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

Five of the top 10 funds were from the North American Smaller Companies sector.

These funds had a good start to 2023 but then went off the boil and only really came back on form in the last couple of months of the year.

North American Smaller Companies chart

Past performance is not a guide to future performance.

In our demonstration portfolios, we currently hold the UBS US Growth fund from the North America sector, which has performed reasonably well for us, but do not hold any funds from the North American Smaller Companies sector. We are considering adding a North American Smaller Companies fund, but unfortunately they have not had a very good start to this year. The five funds shown above each fell by over 4% last week.

I am always slightly suspicious of the numbers at this time of year. Stock markets are closed for the bank holidays and, when they are open, volumes tend to be very low. It will be interesting to see what happens when business gets back to normal.

For more information about Saltydog Investor, or to take the two-month free trial, go to www.saltydoginvestor.com

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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