ANALYSIS-Growth funds among Q3 winners for U.S. investors as COVID worries grew

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NEW YORK, Sept 30 (Businesshala) – US mid-cap growth funds, emerging market stocks and inflation-protected bonds were among winners for US investors in a turbulent third quarter, with the benchmark S&P 500 only to fall to record lows. Investors hit higher levels in late September as rising Treasury yields and debt talks hit Washington.

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Growth funds that invest in U.S. equities beat their value-focused peers in the quarter, as a COVID-19 resurgence over the summer prompted investors to turn back to some of the big technology names leading the markets during last year’s coronavirus lockdown. revived the case. The so-called stay-at-home business. The move has reversed in recent weeks as Treasury yields have turned higher.

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According to Morningstar, the average large-cap U.S. growth fund grew 4.6%, while the average large-cap value fund gained 0.9%. After rising about 8.2% in the second quarter, the S&P 500 is on track for a 1.4% gain.

“The general decline in riskier assets continued and we believe much of this is being driven by accommodative monetary policy,” said Mark Zabicki, director of research at LPL Financial.

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Investors are now speculating about the extent to which the concerns that have arisen in recent weeks will affect the performance of US stocks for the rest of the year. These include a sharp tilt from the Federal Reserve that has boosted Treasury yields, the recession of heavily indebted Chinese property developer China Evergrande Group and a potentially ugly debt ceiling battle between US lawmakers. The S&P 500 is on track to decline 3.6 percent in September.

“The global economy is suffering from a series of significant economic shocks at a time when certain segments of the market are too expensive based on high expectations of long-term growth,” wrote Sebastian Galli, senior market strategist at Nordea Asset Management.

According to Morningstar, of the funds investing in US equities, the $37 million mid-cap 40 ETF was the best performer with a 17.4% gain. The fund’s biggest holdings include cloud-based company HubSpot Inc., which rose 16.9% for the quarter, and biotech company Repligen Corp., whose shares rose nearly 44% for the quarter.

The quarter’s top performers were several funds that invest in Indian equities, a reflection of the rise in the Sensex stock market index, which this year on a wave of central bank-fueled liquidity and tech-focused public offerings is 24.4%. Food delivery company Zomato Ltd surged nearly 66% in its market share after its Indian IPO on July 23, while shares of state-owned Life Insurance Corp are expected to open later this year, hitting a record high in India. largest initial public offering. .

According to the most recent data from Morningstar, gains from the red-hot Indian market outstripped the $617 million Wasatch Emerging India Fund over all other actively managed US-based funds, with a 21.9% return for the quarter through September 24 . . The fund’s biggest position, holding about 10% of its assets, is in financial services firm Bajaj Finance Ltd, whose shares are up nearly 130% over the past 12 months.

According to Morningstar, among bond funds, six out of the 25 top-performing funds invested primarily in inflation-protected bonds, which is nearly twice as much as any other category, amid concerns that consumer prices may drop. The current surge may last longer than expected.

The $4.2 billion Alphacentric Income Opportunities Fund, a multi-sector fund with nearly half of its portfolio in below-investment-grade bonds, turned in the best performer among bond funds, with a 4% return for the quarter.

Randy Frederick, managing director of trading and derivatives at the Schwab Center, said a key factor that will drive the performance of both stocks and bonds for the rest of the year will be the outcome of debt limit talks in Washington over the next few weeks. for financial research.

Congress has yet to pass a funding bill to keep the government open. Treasury Secretary Janet Yellen has warned that the US government will end its debt limit on October 18, leaving open the possibility of default.

Frederick expects the stock market to rally towards the end of the year if those issues are resolved before the deadline. (Reporting by David Randall; Editing by Ira Iosbashvili and Leslie Adler)

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