In his latest review of monthly asset performance, DB's Jim Reid writes that the month of April was for the most part a positive one for the bank's sample of assets. For riskier assets in particular, April was however a bit of a tale of two halves. Escalating geopolitical concerns around Syria and North Korea combined with some unwinding of Trump reflation trades and the prospect of the French presidential elections towards the end of the month kept risk assets in check for much of April while measures of volatility (namely the VIX and VSTOXX) hit year to date highs.
However a market friendly French election result coupled with a strong start to earnings season on both sides of the pond helped risk assets stage a decent rally in the last week to finish with solid returns. Indeed overall, excluding currencies markets saw 29 of the 39 assets in the sample finish the month with a positive return in USD terms. A decent rally for both the Euro (+2%) and Sterling (+3%) meant that returns were generally more subdued for assets denominated outside of the US, however a similar amount of assets still ended the month with a positive total return.
In terms of the movers and shakers, at the top of the leaderboard the top 4 positions are dominated by equity markets in USD terms. Leading the way was Greece’s Athex (+9%) helped by progress of the country’s preliminary agreement with creditors on fiscal reforms, followed then by European Banks (+6%), IBEX (+5%) and Stoxx 600 (+4%). The DAX (+3%) and FTSE MIB (+3%) were not too far behind while the FTSE 100 (+2%) also gained although was down -1% in local currency terms reflecting the bounce for Sterling following the announcement of a call for a general election in June. In the US the S&P 500 returned +1% for the month. EM equities were also +2%.
Not to be outdone, April was also a fairly decent month for bonds. At a sovereign level, in USD terms Gilts (+4%), BTPs (+3%), Spanish Bonds (+2%), Bunds (+2%), Treasuries (+1%) and EM bonds (+1%) all finished the month with solid single digit returns. That fed through into a decent month for credit also. European credit outperformed its US counterparts with EU Fin Sub (+4%), HY (+3%), IG Non-Fin (+3%) and Fin Sen (+3%) all performing well, while US credit eked out a smaller +1% gain generally. Given the results from the 1st round of the French Election and perhaps the fact that so far we haven’t seen any firm evidence of the ECB tapering corporate bond purchases, this might also help to explain some of the outperformance of Europe versus US.
The one asset class which did retreat last month was commodities. The Bloomberg commodity index fell -2% and for the fourth consecutive month. Leading the way was Silver (-6%) which is interesting in the context of a +2% gain for Gold. Energy prices suffered also with Brent and WTI both down -3% while Copper (-2%), Wheat (-2%) and Corn (-2%) also retreated.
Finally, quickly summing up where things stand YTD, at the top of the leader board it is equity markets which continue to dominate. The IBEX (+20%), Athex (+15%), EM Equities (+14%), European Banks (+14%) and Stoxx 600 (+12%) headline the top five, although it’s worth noting that equity markets occupy the whole of the top 10. Gold (+10%) and Silver (+8%) follow closely while credit markets are up anywhere from +2% to +7% with Europe outperforming the US. Treasuries (+2%) and Bunds (+3%) are also up for the year. In fact in USD terms only four assets in the sample have delivered a negative return so far this year. That includes Brent (-11%), WTI (-8%), Bloomberg commodity index (-6%) and Russia’s Micex (2%).
Source: Deutsche Bank