Most popular and best performing investments of H1 2021

•    UK small caps on a hot streak of performance
•    Bond funds bring up the rear of the performance tables
•    “Old economy” stocks top the Footsie table
•    DIY investors plump for crypto mining, meme stocks and value bargains

Laith Khalaf, financial analyst at AJ Bell, comments:

“So far 2021 has been a positive year for equity markets, but the Footsie is still playing second fiddle to the US stock market despite the rally in value stocks which make up such a big slug of UK plc. However the real stand out winner of the year to date has been the UK Smaller Companies market, which has enjoyed an incredibly hot streak of performance. Indeed so far this year the FTSE Small Cap index has repeatedly set new record highs and now sits around 20% higher than pre-pandemic levels. The smaller companies market does have a greater exposure to domestic revenues than the big blue chip index, so this is partly a vote of confidence in the UK economy but also a sign of investors positioning themselves for a risk-on market.”

Major market performance (and FTSE Small Cap)

Source: FE total return GBP

Best and worst performing funds

“The strong performance of the FTSE Small Cap explains why UK Smaller Companies funds dominate the top of the performance table so far this year. At the bottom end of the performance table, gold funds find themselves out of favour, with a global economic recovery and rising bond yields both serving to undermine demand for the precious metal.”

Source: FE total return GBP

Best and worst performing IA sectors

“At a sector level, bond funds have had a pretty grisly year so far, as vaccine optimism and inflationary fears have led to a sell-off in safe haven assets. Bonds can still offer portfolio diversification, but it’s hard to maintain a positive outlook on the asset class, particularly at the longer dated end of the market, given such low yields and a global economy that looks like it’s beginning to take off. While inflationary fears have surfaced, they have not yet really taken root, otherwise the UK ten year gilt would not be yielding a meagre 0.7%. If inflation does prove more than transitory, we can therefore expect further sell-offs in bonds. Should that happen, it would be a shock to bond investors who have enjoyed a long bull market, and who generally invest in these assets because they’re risk averse.”

Source: FE total return GBP

Best and worst performing FTSE 100 shares

“The top end of the FTSE 100 performance table carries a distinct whiff of the old economy, with names like Royal Mail, BT, and Ladbrokes owner, Entain, evoking aromas of a bygone era. However while communications, logistics and gambling are longstanding industries, these markets have moved with customers, and the times. Royal Mail takes a turn on delivering parcels ordered by consumers online, BT owns the mobile network EE, and Entain derives most of its revenues from online betting and gaming.

“Lloyds bank is a perennial favourite with DIY investors, and has enjoyed a strong first half of performance, though it remains shy of its pre pandemic level. Indeed the broad UK stock market as measured by the FTSE All Share is still trading around 10% lower than its pre-pandemic level. So despite the resurgence of appetite for the UK market, it still lags behind the US where the S&P 500 is around a third higher than at the beginning of 2020.

“The bottom end of the FTSE 100 performance table is a bit of a mishmash of lockdown winners that have come off the boil, and more cyclical names that have failed to ignite demand, despite hopes for a global economic recovery.”

Source: Sharepad, share price performance, dividends not included

Most popular investments with AJ Bell Youinvest customers H1 2021

“The most popular shares bought by DIY investors on the AJ Bell Youinvest platform in the last six months showcases a number of investment trends which we’ve witnessed this year. At the fizzier end of proceedings, Argo Blockchain has been used by investors to get exposure to cryptocurrency, and Gamestop was the epicentre of the meme investing craze. But purchases of stocks like IAG, Lloyds and Rolls Royce show investors also continue to seek out bargains amongst the UK’s value stocks.

“Growth orientated funds still dominate the leaderboard of most popular funds, with offerings from Baillie Gifford continuing to attract investment. But there are a couple of signs of a tentative shift in investor preferences, with demand for Jupiter UK Special Situations and Blackrock World Mining suggesting some investors are positioning themselves in more cyclical areas, in preparation for an economic recovery, and perhaps inflation.”

Source: AJ Bell Youinvest, 01/01/21 – 30/06/21