With equity markets dropping over the last month, it’s no surprise that 41 Morningstar Fund indices experienced losses in September, while just two — both money market-related — saw near-zero returns.
“Equity markets plunged, and investment funds along with them, in the face of the worsening U.S. credit crisis,” says Morningstar Canada in a release. “The collapse of some former U.S. financial services titans, which were either sold at fire-sale prices or taken over by the U.S. government, and the proposed $700 billion rescue plan that failed to win the House of Representatives approval, precipitated some of the biggest single-day losses ever for North American stock markets.”
By the end of September, Morningstar’s U.S. Small/Mid Cap Equity Index fell 11.6%, while the U.S. Equity Index dropped 9.9%.
Canadian small and mid-cap oriented funds also took a dive with the Focused Small/Mid Cap Equity and Canadian Small Mid Cap/Equity indices falling 19.8% and 18.2% respectively.
“Access to funding continues to be stifled by the credit crunch, and small- and mid-sized companies especially are feeling the lending squeeze,” says Al Kellett, a fund analyst for Morningstar Canada.
As bad as those numbers are, the worst performer of all was the Morningstar Natural Resources Equity Fund Index, which lost 21.4%. “Much of the downturn can be attributed to lower demand estimates amid weakening global growth, which led the price of oil to fall by more than $10 a barrel in September,” Kellett explains.
Weakening resource prices also translated into a 14.5% drop in the Canadian Equity Index, and a 12.1% loss for the Canadian Income Trust Equity and Canadian Focused Equity indices.
Even funds that invested overseas took a huge hit, with the Greater China Equity — Morningstar’s newest fund index — experiencing an 18.9% loss.
Other fund indices that declined were the Emerging Markets Equity Index, which saw a 17.2% drop, the Japanese Equity Index, which fell 9.2%, the Asia Pacific Equity Index, plummeting 10.7%, while the European Equity Index was down 14.8%.
Morningstar’s Precious Metals Equity Index also took a tumble, declining 13.5% in September. “Precious metals stocks fell despite a 10% rise in the price of gold bullion, as investors sought a safe haven from plummeting equity prices,” says Kellett.
Fixed income-fund categories also fell, with the Canadian Inflation Protected Fixed Income Index sinking the most — down 8.6%. However, the Canadian Short Term Fixed Income Index only dropped only 0.8% while the two money-market fund indices saw their returns hover around zero.
Filed by Bryan Borzykowski, Advisor.ca, bryan.borzykowski@advisor.rogers.com
(10/02/08)