Share prices have been in recovery mode over the past four months. After a sharp slide on the UK market late last year, the bulls appear to be back in charge in 2019. When it comes to investment styles, some of the big early winners from this kind of change in sentiment are the growth strategies - and we’re starting to see the signs of that.
The bulls fend off the bears… for now
Last autumn’s market dip had many of us wondering whether time was officially up for the long running momentum streak. But while the downswing was dramatic, the mood has turned much more upbeat in 2019.
The large-cap FTSE 100 index, for instance, is up by 10 percent since January. The FTSE 250 and the growth-focused AIM All-Share are both up by 13 percent. Setting the tone for all this - on the other side of the Atlantic - the US S&P 500 is once again troubling the record books as it stretches to new all-time highs.
Among the top UK performers over the past six months, the biggest gains across the FTSE 350 have been in stocks like Ocado, Micro Focus International and Greggs. On main AIM board, the big winners have been the likes of ReNeuron and Earthport (on a takeover approach from Visa). And on the AIM 100, the leaders have been AB Dynamics and the relatively newly-listed Codemasters.
Swings in sentiment
Late last year it was clear that the negative market momentum was causing problems for some of the most popular growth stock strategies. When confidence wanes, growth stocks are often the first to sell-off as investors opt for safer territory. So in the final three months of the year, growth and momentum strategies were among the biggest losers.
An additional challenge for growth strategies in bearish conditions is that they often struggle to find buying options. Typically, most of these approaches will look for some variation of earnings growth, quality and price strength in the shares they target. So in falling markets, negative momentum can result in very few shares passing their rules.
So it was pretty bleak for growth investors for a time in early 2019. Yet one of the boons of a pull back in…
