Strong H1 for global equities despite 'gloomy outlook'
Despite the overall positive performance for equities, UK equities made only modest gains during the first half of the year.
The report found the performance of global equities is to thank for the turnaround, which has come despite recession fears, increasing interest rates, a US bank crisis and the bailout of Credit Suisse.
Global equities saw a 7.7% rise in the first half of 2023, although Morningstar said this included a «sizable contribution from a fairly narrow subset of mega-cap US technology stocks associated with the artificial intelligence theme» and would therefore be of less benefit to managers underweight to growth, the United States and/or technology.
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Meanwhile, fixed income markets endured a mixed first half for sterling investors, with UK gilts down 3.5%, sterling corporate bonds down 1% but a 2.4% gain for GBP-hedged global.
This was still a far better environment for fixed income than last year, when UK gilts lost nearly 24% (giving back a decade's worth of gains).
Growth stocks were unloved in 2022 against the backdrop of high inflation and rising rates, but have come to the forefront during the first six months of 2023.
«Given persistent inflation, more rate rises and a gloomy economic outlook, it is perhaps surprising that growth equities performed so strongly in the first half of 2023,» the report said.
The Morningstar Global Growth TME Index (in GBP) recorded a rise of 14.5%. Furthermore, the Morningstar Global Technology TME Index, which lost 24% in 2022, gained over 32% in the first half of 2023, in GBP terms.
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The report revealed that the rotations in equity market leadership from
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