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Morningstar Insight: Equity investors enjoy a bullish July

Morningstar Insight made the following observation today:

Most equity mutual funds got off to a solid start in the third quarter. Of the 22 Morningstar Canada Fund Indices that measure the performance of equity categories, 17 increased in July, according to preliminary performance numbers released today by Morningstar Canada.

Positive performances by US and most global equity markets were driven largely by the comments of US policymakers, in particular, the Federal Reserve Board's assertion about its plan for the foreseeable future. Chairman Ben Bernanke's statement that "tapering is not tightening," -- that interest rates are expected to stay low even as the Fed curbs its bond-buying program -- was key to easing market fears. Central banks around the world supported the plan to maintain an accommodative policy.

The best regional results were for the Morningstar Canada European Equity Fund Index, which increased 6.6%, and the US Small/Mid Cap Equity Fund Index, with an increase of 4.7%.

By comparison, with its broader focus, the US Equity Fund Index was up 3.4% for the month. The geographically diversified Global Equity and North American Equity indices also fared well, with increases of 2.9% and 2.6% respectively.

Among the other top-performing categories, the Morningstar Canada Canadian Small/Mid Cap Equity Index was up 3.9%, while the Canadian Equity Fund Index increased 3.1%. Canadian investors benefited from an appreciating Canadian dollar and higher energy and commodity prices, and concerns about the health of the domestic economy appear to be easing. Other positives include signs of a soft landing for the housing market and expectations that Canada will track the improving US economy over the long term.

Slightly better results came from the Canadian Focused Small/Mid Cap Equity, Canadian Focused Equity and International Equity Fund Indices, with each increasing 3.3% in the month. Funds in the "Canadian Focused" categories must invest at least 50% and no more than 90% of their equity holdings in securities domiciled in Canada.

In a sharp reversal from June's results, funds that focus on precious-metals equities posted the biggest increases overall. The Precious Metals Equity Fund Index had an aggregate increase of 9.6% as gold prices rebounded amid renewed expectations for low rates.

While precious-metals equity funds significantly outpaced funds in all other categories, it was also a stellar month for several other sector-specific funds. The Natural Resources Fund Index increased 3.7% in the month. The indices for Health Care Equity funds and Financial Services Equity funds, meanwhile, increased 6.6% and 4.2% respectively.

Results were mixed for funds that invest in Asia. While the Morningstar Canada Greater China Equity Fund Index increased 2.1% amid concerns about China's slowing economy, the Asia Pacific ex Japan and the Asia Pacific Equity indices had slightly negative results of 0.8% and 1.1% respectively.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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