It's the start of a new month, which means Deutsche Bank's Jim Reid is out with his monthly review of the best and worst performing assets (excerpt cryptos) and everything in between.
For the most part, Reid notes, 2018 so far has picked up where 2017 ended with most risk assets delivering solid single digit returns. Partly boosted by the US tax reform developments, the S&P 500 extended its consecutive run of monthly gains to an incredible 15 months dating back to November 2016. Of note: January 2018 was actually the strongest month in total return terms during that run. All this comes even despite the month-end wobble partly caused by a selloff across government bonds, which largely dominate (along with credit) the bottom of the total return leaderboard.
In summary out of the 39 assets in DB's sample, 27 finished with a positive total return in local currency terms while 33 did so in USD terms. Clearly the latter reflects some big moves in FX markets this year so far with the likes of the Euro, Sterling and Yen up +3.4%, +5.0% and +3.2% respectively versus the USD.
Digging into performance in more detail, higher beta equity markets dominate the top of leaderboard. Indeed in local currency terms the top 6 are dominated by the Bovespa (+11.1%), Hang Seng (+9.9%), Greek Athex (+9.5%), Russian Micex (+8.6%), MSCI EM equities (+8.3%) and FTSE MIB (+7.9%).
The S&P 500 (+5.7%) is only slightly behind however while European equity markets – although still positive – have generally lagged other markets. The Stoxx 600 returned +1.7%, DAX +2.1%, Portugal General +3.4% and IBEX +4.5%. Returns do however look more respectable in USD terms as you’ll see. It’s worth noting that the move in yields has helped European banks return +5.1%. Also worth highlighting was the relatively weak performance for the FTSE 100 (-2.0%) in January with the rise in Sterling.
With regards to bonds, with the exception of the periphery where BTPs (+0.4%) and Spanish Bonds (+1.1%) just about closed with a positive total return, core markets delivered negative returns with Bunds -1.0%, Treasuries -1.5% and Gilts -2.1%. That weighed on credit although returns were closer to flat in Europe (EU Fin Sub +0.2%, IG Non-Fin -0.3% and Fin Sen -0.3%) reflecting a solid month of tightening with US markets also beating Treasuries (Fin Sen -0.9%, IG Corp -1.1%, IG Non-Fin -1.1%). It’s worth highlighting that HY had a stronger month helped by being shorter in duration, with both EU and US +0.4% in total return terms.
Finally for commodities, January was largely a positive month. WTI Oil tops the list with a +7.1% rally while Wheat (+5.8%) follows closely. Gold and Silver prices were up +3.2% and +2.4% while the laggard was Copper (-3.2%).
Here is the visual breakdown of January returns in local currency, and USD terms.
Source: Deutsche Bank