As Q1 of 2019 was the reverse of Q4 2018, May was a reversal of April’s Bond and Equity returns, however these returns varied extensively dependent on currency. Equities lost 2.5% (MSCI world) in Sterling but were down 5.7% in Dollar terms and 8.1% in Japanese Yen. This explains why much of the financial media, which tend to be US centric and therefore reporting in Dollars, were so animated about the losses in May.
It’s also a timely example of the importance of returns net of currency moves. The Pound/Dollar fall during the month has once again coincided with a broader equity sell-off and therefore cushioned the blow. As we have said many times before, the real pain could come if a market fall coincides with a period of Sterling appreciation. The Yen figure for May shows you what that could look like.
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Photo Credit: Official White House Photo by Shealah Craighead President Trump participates in a joint press conference with British Prime Minister Theresa May.