Global equities rose in July, mainly due to increased expectations of further global monetary stimulus as opposed to any improvement in fundamental data. We remain cautious and expect markets to be unsettled in the months ahead. This is despite the Bank of England’s interest rate cut and renewed quantitative easing operations and ongoing loose monetary policy in Europe and Japan.
Year to date the FTSE 100 is up over 10% in total return terms. Over the same time period the FTSE Index of UK Conventional Gilts rose by over 13% and gilts are now even more expensive than they were at the start of the year.
The extraordinary impact of Sterling’s devaluation following the Referendum can be clearly seen in the returns provided below when the local currency numbers are compared to the returns when translated into Sterling. This is particularly true for the US and Japan. The S&P 500 has risen 23.32% in Sterling terms in the last year, compared to 4.92% in US dollars. The comparison is even starker for Japanese equities with the FTSE Japan up 14.08% in Sterling terms and losing 19.71% in Yen terms….