The sustained rise in the value of Sterling vs other major global currencies was the main story of the last week from the perspective of a UK-based investor, much as it has been for the year to date. The US Dollar was down -1.3% vs Sterling last week (-2.8% for the year to date) while the Euro was down -1.1% (-6.1% for the year to date).
Mr Market clearly “likes” the idea of a Tory majority capable of passing Johnson’s Brexit deal. We have not just seen this in the currency market, Global Bonds have outperformed Sterling bonds since we launched our MAB Funds in July and domestically-focused UK Equity has strongly outperformed firms listed in London but with little UK economic exposure over the same period. This is a strong reversal of the trends we have seen over the last four years.
Across other Equity asset classes, Emerging Markets and Japanese Equity have been the only positive contributors over the last month, but we should take this opportunity to reflect on how strong returns have been this year across both Equity and Fixed Income. The MSCI ACWI Index of Global Equities is up +19.2% in GBP terms, while the Bloomberg Barclays Global Aggregate Bond Index is up +6.5% when hedged to GBP. As investors, it is probably wise to brace ourselves to the reality that these exceptional returns across asset classes are unlikely to be replicated in 2020.