Equity markets made some headway in Sterling terms in October. The FTSE 100 hit a record high during the month, fuelled by currency weakness and quantitative easing rather than any improvement in fundamentals. Returns were more muted by the end of the month as certain industry sectors, in particular, commercial property and oil companies proved to be a drag on the index. There is limited exposure to these areas within our portfolios.
Sterling has dropped nearly 20% compared to the US Dollar since the EU Referendum. Currency translation effects therefore continue to be a major influence on Sterling versus local currency returns. This is especially true for assets denominated in US Dollars and the S&P 500 and the gold spot price have been influenced accordingly. For instance, the S&P 500 is up over 27% in the last year in Sterling terms compared to 5.3% in US Dollar terms. The index actually made a loss of 1.86% in October in local currency terms, but this is masked if these returns are translated into Sterling and a 4.4% gain is seen. Likewise the gold spot price fell 6.2% in US Dollar terms in the last 3 months, but a gain of nearly 2% is seen once these returns are converted into Pounds. These effects therefore remain positive for Sterling based investors.