“Equities are doing best where monetary policy is being loosened the quickest – Europe and Japan – but some of these gains are being lost to currency weakness and the dollar's strong run is boosting returns from American stocks for UK-based investors,” says Russ Mould, AJ Bell Investment Director. “The US dollar is the world’s haven currency and its strength points to America’s economic outperformance of its Western peers, while sterling's recent slip potentially reflects concern over the result of May's General Election. Currency movements are playing a big role in shaping total investment returns in 2015 and investors worried about this can look toward exchange-traded funds (ETFs) and some actively-managed funds which hedge out currency movements and provide local returns in sterling terms, albeit potentially at an additional cost.”
Notes for Editors
- The accompanying spreadsheet outlines returns in local currencies, dollars and sterling for major stock market indices and geographies on a one- and three-year view, as well as since 29 October 2014.
- The US Federal Reserve stopped adding to its Quantitative Easing (QE) scheme at the end of last October.
- Japan increased the size of its QE programme the following day and the European Central Bank announced its scheme in January with a view to launching it in March
- The trade-weighted dollar index has surged 10% since October and 17% to 94.7 over the past year.
- Since 29 October, the pound has fallen by 5.6% against the dollar and risen by 6.3% versus the euro.