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US markets are partying but we're not invited

The Dow Jones and S&P 500 notched up more milestones this week, but investors over this side of the pond saw their US stocks fall.

US markets are partying but we're not invited

Stock market records have continued to fall across the pond, as the Dow Jones index this week breached the 26,000 mark for the first time and the broader S&P 500 notched up its own milestone with its first push over 2,800.

But investors on this side of the Atlantic will be forgiven for not joining in the celebrations. UK investors actually saw their US investment slide this week, as the dollar's slump, coupled with a resurgent pound, ate into returns.

Dollar weakness, coupled with rallying US stocks has been a feature of markets ever since Donald Trump was elected US president. 

The Dow Jones has rallied more than 30% since Trump was inaugurated president in January last year. Barring the 33.4% gain under Barack Obama's first year as president, when markets were rallying from financial crisis lows, it's the best return from the Dow Jones under any US president since the Second World War.

Trump even has a chance of pipping that record, but he would need a 432-point, or 1.7%, rally on the Dow Jones today to get there, according to calculations from AJ Bell.

But as our exclusive Accumulator data table shows, US stock market returns have been roughly cut in half for UK investors over the last year, thanks to the dollar's 11.1% slump against the pound over the last 12 months.

The S&P 500 hasn't quite matched the returns of the more concentrated Dow Jones index, and is up around 24% over the last 12 months.

But in pound terms that has translated to an 11.7% gain. That's not to be sniffed at, but trails the likes of the 17% return from European stocks, where currency has been a boost rather than a burden.

It appears the Donald has been granted his wish. As he started his presidency, Trump made clear he was keen for the currency to fall, saying the dollar's strength was 'killing' the US's competitiveness with China.

And he's not done much to help the greenback this week. Fears of a US government shutdown have weighed on the currency in recent days, and Trump hasn't helped efforts to find a resolution.

The US House of Representatives passed a bill yesterday to extend government funding. A Senate vote is expected today, with Republications needing support from Democrats. Trump's tweet yesterday criticising the bill's extension to a children's health insurance programme offered as a sweetener to Democrats, won't have helped that effort.

You can access the Accumulator here.

1 comment so far. Why not have your say?

colin overton

Jan 19, 2018 at 18:20

I was in the US in the run up to the Clinton/Trump election. I watched incredulous as "Back of the Queue" Barack proudly announced on TV that in his 8th year in charge, US average wages had increased above 2000 levels!? Now the "bad years" were not BOTQ Barack's fault, but I would have kept quiet about this "impressive" statistic, particularly 2 months before an election. wouldn't you? And people wonder why Hilary lost.

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