Now that we’ve got to the end of March, it’s time to take stock of where we’ve got to so far this year. Monthly and quarterly charts to the fore, with big moves for equity indices in January and February, followed by a rush into interest rate markets as central banks back-pedal on their long-held ambition to get interest rates back to ‘normal’. Economists and fund managers as ever eager to tell us how much we might have made if we’d invested in X, Y or Z.
Most investment menus stretch to between 25 and 50 assets, not classes, the usual predictable fare with a few exotic morsels to make it seem a decent representation of one’s options. One bank’s research boldly states: "This was the best quarter for WTI Oil (+32.4 per cent) and the S&P 500 (+13.6 per cent) since Q2 2009" and goes on to say "it’s the scale of returns which have been impressive, as well as the breadth". Yes, but this US index is not back to where it was in October, having merely recovered most, but not all, of the catastrophic losses in Q4 2018.
Of the many equity indices I follow, the biggest rallies have been in China, the Shenzhen A shares index up 34.95 per cent, closely followed by ChiNext’s 34.7 per cent rise. Look at the quarterly chart in the box and you can see that Q1’s rally is big, but not unusual, by historical standards. You will also see that it has yet to get back up to where it was in January 2018. A positive quarter, yes, but those who’ve been hanging on for a year or more are still under water.
Fixed-income markets saw strong rallies and a sudden drop in yields during March, because the US Federal Reserve announced that continued interest rate rises were unlikely this year, and the ECB decided to reinstate TLTRO version III. Ironically, the best-performing sovereign paper was UK gilts, led by the long end. The best performer was the Index Linked 0.125 per cent March 2068 issue which started this year a whisker over £200 per £100 nominal, reaching the nose-bleed inducing heights of £275 on 22 March, before drawing its horns in a little. It’s nearly back to 2016 and 2017’s record highs – and worth a lot more than when issued in 2013.
In the foreign exchange sphere, the focus has been on the Argentine peso and the Turkish lira, raddled as they both are by inflation and recession. However, performance this year has not been as bad as some feared, the peso dropping 13 per cent against the US dollar and the lira just 3 per cent. European and Asian currencies are within 5 per cent up or down against the greenback, the outlier which was up almost 10 per cent late March (currently 6 per cent) being the Russian rouble. It pays to look at the detail.
Outstanding performance has also been seen in Kingdom of Sweden 3.5 per cent 20-year paper which in February last year was priced at 133 Swedish krona going on to hit 150.75 SEK on Monday. Over the period the yield on 10-year paper has dropped from almost 1 per cent to just 0.1 per cent. Looking at the move from this angle, that’s an almost 10-fold shift.
