The most notable price action over the past month has been the performance of the US dollar.
In July it weakened against most currencies including the pound sterling – against which it weakened by 5.5%.
The table below shows the Asset Class Returns to the end of July 2020 in GBP.
This is quite the reversal of what we saw in the first two and a half months of the year. At its peak in the middle of March, the US dollar had gained over 14% relative to sterling.
Now the peak coming in the middle of March gives us some information about what is going on.
It was in the second and third weeks of March when the stock market sell-off was at its worst. For a couple of days, every asset was being sold, including supposed safe havens such as gold and US government bonds. This was the peak of the liquidity crisis when it appeared that many investors where selling everything they could, to raise US dollars (which was the only asset going up).
In response to this, the US Federal Reserve (the Fed) undertook a number of policy actions including the creation of temporary US dollar ‘swap lines’ with other central banks. This basically increased the supply of US dollars and injected liquidity.
The actions were successful, the dollar started to weaken, and the crisis started to ease.
It is now 4 months later, and this trend persists.
A weaker dollar in July was a positive factor for emerging market equities and to an extent, the price of gold.
Rosecut GBP Portfolios
A stronger pound meant the best performing assets over the past month were those not exposed to currency movements, such as the currency hedged high yield ETF and the UK Property ETF – along with emerging market equites as referenced earlier.
Rosecut USD Portfolios
Emerging Market equities were again the best performer, with US equities in second place. The weaker dollar meant that all non-domestic (as in non-US) equities gained in value, once converted back to the portfolio’s base currency of dollars.
Year to Date Performance
The most popular Rosecut portfolio is the GBP Balanced. At the end of July, the model portfolio was down 0.64% for 2020. We compare this to the ARC PCI GBP Balanced index* which is down 3.01% over the same time period. Both are net of the impact of fees.
The table below shows performance over more time frames.
You should be aware that past performance is no guarantee of future performance.
Please note: all numbers listed above are sourced from Financial Express Analytics
* The ARC PCI indices are based on the returns being generated by investment managers in the private client industry for discretionary run portfolios. More information can be found on their website at: https://www.suggestus.com/
** The Rosecut Balanced model has an inception date of 28th February 2019
In the opening table UK government bonds are represented by the FTSE All-Stocks Gilts index and UK corporate bonds by the Bloomberg Barclays Sterling Aggregate Corporate index.
The value of an investment and the income from it can go down as well as up and investors may not get back the amount invested. This may be partly the result of exchange rate fluctuations in investments which have an exposure to foreign currencies.