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The Accumulator: portfolios reel from punishing pound

Investors suffered losses in almost every market this week, as the strong pound weighed on returns.

 
The Accumulator: portfolios reel from punishing pound
 

Investors' portfolios took a bit of a punishing this week, as the pound's surge on hopes of progress in Brexit negotiations took its toll on returns.

As our exclusive Accumulator data table shows, the pound made gains against the dollar, yen and euro in the five days to yesterday.

That ate into the value of overseas stocks, meaning investors saw little gains from a record-breaking week in the US, with the S&P 500 and Dow Jones notching up all-time highs, buoyed by the prospect of tax cuts.

UK investors banked just a 0.2% return from that rally, as the dollar lost 1.8% against sterling. But that headline figure hides a big divergence with the US stock market, driven largely by US tax reforms currently being debated by the Senate.

That has sparked a rally in the sectors of the market expected to benefit the most, like banks, and a sell-off from those unlikely to receive as much of a boost, like technology companies, who already pay low levels of tax.

The US was the only market to offer UK investors any return this week, as all other major global stock markets slumped into the red in pound terms.

In some cases, such as Japan and Germany, stock markets made gains in their local currencies, but these translated into losses in sterling.

In emerging markets, the strong pound served to amplify losses, such as Brazil, down 6.1% and hurt again by political jitters, as a pension reform bill passes through its parliament. 

The broader emerging markets index was down 4.5%, as the US tech sell-off spread, which Asian giants like Samsung (005930.KS) and Tencent (0700.HK) hit.

Even at home, the FTSE 100 fell 1.2%, weighed down by impact of the pound on the index's high proportion of overseas earnings.

Oil was meanwhile a bright spot in the markets, buoyed by the Opec cartel of oil producing nations' agreement to extend production cuts.

But the strong pound limited gains from dollar-priced Brent crude to just 0.1%.

Of course, there was one asset offering stronger returns this week. Bitcoin has rallied around 3.7% in pound terms this week, as it surged through the $10,000 mark. But forgive us if we don't find a row for it in our table just yet.

To view the Accumulator table, click here.

 

1 comment so far. Why not have your say?

Roger Savage

Dec 01, 2017 at 20:18

There's a difference between a strengthening pound and a "strong pound". Against a historic backdrop, the pound is not at all strong at the moment.

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