Market dispersion, the gap between the best- and worst-performing sectors and geographies, has widened significantly this year, reaching levels not seen in some time. This environment creates both substantial opportunities and elevated risks for active investors.
A striking example is South Korea, a holding in both Fintax funds since the beginning of the year. In October, the South Korean equity market delivered +22.7% in USD terms, contributing to a remarkable year-to-date gain of +93.3%.
| Performance in USD (MSCI Indices) | |||
| Country/Region | 1 Month | Country/Region | 1 Month |
| Argentina | 63.63% | France | 0.96% |
| South Korea | 22.65% | Europe | 0.76% |
| Chile | 7.10% | Brazil | 0.67% |
| Portugal | 5.04% | South Africa | 0.57% |
| India | 4.41% | Israel | 0.39% |
| Emerging Markets | 4.19% | Italy | -0.60% |
| Asia | 4.13% | Vietnam | -0.69% |
| Japan | 3.39% | Mexico | -0.81% |
| United States | 2.38% | Australia | -1.04% |
| All Countries World | 2.26% | Germany | -2.09% |
| Spain | 1.95% | China | -3.82% |
| United Kingdom | 1.68% | Greece | -4.37% |
Source: MSCI Indices
While gold, the traditional safe-haven asset, has delivered excellent returns this year, some of the other defensive sectors have lagged. In last month’s commentary, we highlighted U.S. Healthcare, which continues to trade at its cheapest relative valuations in over 30 years.
U.S. companies, including those in Healthcare, have consistently exceeded earnings expectations. With 81% of S&P 500 companies having now reported third quarter results, aggregate earnings have beaten estimates for the 11th consecutive quarter. Despite remaining undervalued, the U.S. Healthcare sector posted the strongest earnings surprise of any sector at +12.33% above consensus, the highest outperformance among all S&P 500 sectors.
Source: Bloomberg/Sarasin Partners.
Investor sentiment toward U.S. Healthcare has yet to reflect this fundamental strength. As noted last month, the Fintax International funds have continued to actively manage their U.S. Healthcare exposure, adding selectively during periods of market weakness.