Much was said about the outperformance of the Nikkei relative to other asset classes in various months in 2014. Outperformance in Yen terms that is: for 2014 the Nikkei was actually down in USD terms. However, somehow we doubt if as much will be said about January's best performing asset - again, in local currency terms - which was the Russian stock market. Actually, come to think of it, we doubt anything will be said in the mainstream media about January's two best performing assets in USD terms either: silver and gold.
In Local-currency terms:
In USD terms:
Some additional color from Deutsche Bank:
It was an eventful start to the year for markets with the ECB's QE decision, the Greek election, a surprise policy move by the SNB, and the further weakness in Oil being just some of the key headlines that dominated the month. Asset performance was a mixed bag partly distorted by the large moves in FX markets. Indeed if we were to pick the 'clear cut' winners for January the US Dollar and precious metals were probably the standouts. For instance on a local currency basis, Russia's MICEX (+18%), the DAX (+9%), FTSE MIB (+8%) and Stoxx (+7%) were some of the best performers (indeed it was the strongest January for the Stoxx600 since data started in 1990) although much of these gains were eroded by the strength in USD. The Ruble took another hit last Friday following the surprise interest rate cut while European assets are affected by the decline in the EUR. Indeed if we rebase all these assets in USD their respective performances would be closer to flat in the case of the strong European ones and negative in Russia thus illustrating the huge FX swings.
Indeed the Dollar had another good month with the DXY index (+5%) up for its 7th consecutive month - the longest stretch of gains since the Bretton Woods collapse in 1971. The JPY and the CHF were the only two G10 currencies that appreciated against the Dollar in January - the former explaining the outperformance of the Nikkei (in Dollar terms) against other DM equities in January. This is interesting as the big macro Japan trade has been quiet this month. The EUR and GBP were down around 7% and 4% against the Greenback in January. The 'January effect' lost its magic for the second consecutive year with S&P 500 finishing the month about 3% lower. Note that Greek equities were down -12.5% and -18.3% in Euro and USD terms.
Fixed income had a good month generally across the board with Treasuries, Bunds, and Gilts up +3.0%, +2.2% and +4.9% respectively. Although similar to trends elsewhere, EUR and GBP denominated assets underperformed on a currency adjusted basis given the Dollar strength. Another good example to show here is perhaps in Credit markets. US HY and EU HY were up around +0.6% and +0.9% respectively in local currency terms but on a Dollar basis EU HY finished the month much lower at around -6%.
Turning to commodities, Gold (+8%) and Silver (+10%) are leading the way higher perhaps a reflection of reflationary and flight to quality trades being put on. Not all commodities were higher though as growth proxies such as Brent (-8%), WTI (-9%), and Copper (-12%) all suffered which is perhaps a sign of where global growth is feared to be headed. As usual our asset performance tables and charts are updated in the PDF. Given the currency moves our charts showing the difference between local currency and USD returns are fascinating.