2015 is perhaps the first year in which, in nearly a decade, when discussing asset returns one has to ask "in what currency" for the simple reason that the USD itself is one of the best performing "assets", having soared at a pace unseen in decades and having led to a crippling of corporate profitability and a tumble in the US economy (even as the Fed still blames the dramatic Q1 weakness on the winter and a port strike).
As such the returns of the best, worst (and everything inbetween) assets in March and in the first quarter vary dramatically depending on whether one looks at local currency returns (which in a world furiously waging currency wars is not difficult to achieve) or in US Dollar terms.
Here is what Deutsche Bank has to say about asset returns, first in local currency terms:
We'll first look at local currency returns and then convert into dollars. In the month which saw the ECB begin QE we have seen some interesting moves in March. One clear winner has been European equity markets which led the way taking up 5 of the top 6 performance places in local currency terms (Figure 1) with the DAX returning 5% on the month, followed by the DJ Stoxx 600 Bank index (+4.9%), the Portugal General index (+4.4%), the FTSE MIB (+3.7%) and the IBEX 35 (+3.3%). The only asset to outperform these indices was the Shanghai composite which returned around +13%. Another big performer in the first month of expanded QE was the USD as EURUSD and GBPUSD both dropped around -4%. In the bond world the clear winner in Europe was the Bund which returned +1.5% on the month although this was exceeded by the +2% Gilt return. Interestingly higher beta European fixed income was left behind with Italian and Spanish government bonds returning +1%, EUR corporate HY returning 0% and EUR IG all, non-financial and senior financial bonds all losing -0.2% in what looks to be have been very technically (supply/demand) driven performance. The negative total return performance in EUR IG all and non-financial credit breaks these markets’ runs of 14 consecutive months of positive total returns. The assets with the worst performance in March were Greek equities (down -12% on rising political tensions) and Brent Oil (down -13%).
Looking over Q1 as a whole in local currency terms (Figure 3) the clear winner so far in 2015 has again been European equities with the Portuguese, German and Italian major equity indices returning over 20% each. The only markets to have given European equities a run for their money have been the Russian, Chinese and Japanese leading equity indices which returned +16%, +16% and +11% respectively. European fixed income has also seen a solid start to the year led by the Italian and German government bond markets (up around 5.5% and 3.7% respectively) and the high beta credit indices with EUR HY and EUR Sub Fin both up around +3%. Finally the strength of the USD and the weakness of the EUR have been key themes as EURUSD fell -11% and GBPUSD fell -5%.
The big surprise is when converting everything to dollars. Suddenly all those massive European gains are anything but, and one surprise winner emerges. The same bubbly winner as we observed a month ago when it took was the best performing asset in February. From DB:
The main effect of looking at Q1 returns in US dollars (Figure 4) is to shift down EUR asset performance as EUR equities lose their top spots to the Chinese and Russian markets although they still rack up returns of around 10%. The S&P 500 just about edges into positive territory (+1%) but struggles relative to its international peers due to a stronger dollar, weaker data and no more QE. Broadly speaking though US fixed income market returns overtake the EUR market as, in $ terms, European fixed income returns have been completely overwhelmed by the currency move with even the Bund losing almost -8% YTD in $ terms. So a fascinating year so far and one where the currency has made a significant impact on returns ensuring a wide but near equal spread of winners and losers in dollar terms.
Presenting: China, whose stock market bubble slammed everyone in March. The same bubble that has now left even BNP speechless.
And the biggest surprise of 2015 so far - the best performing USD-denominated asset class so far this year is...