Investment Newsletter September 2018
America first When Donald Trump was elected as president he promised to put “America first�.
Mike Deverell Investment Manager
Equilibrium Investment Management
There is certainly one aspect where America is leading the way this year, and that is in the stockmarket.
All World Index ex-US, the green line) in dollar terms. The two lines tracked each other fairly closely until May. From then on, there has been a sharp divergence with the US continuing to rise whilst the rest of the world has fallen by nearly 6%.
Most markets around the world are flat at best so far in 2018. For example, the FTSE 100 started the year at 7,687 and as of close on 7 September it was at 7,277, down 5.3% in price terms (a 2.1% loss when you factor in dividends).
Whilst there are always differences in returns between different market regions, most major markets generally go up and down at the same time. It is very rare that you get such a sharp difference in direction.
Meanwhile, the S&P 500 (the main US market index) is up 8.4% so far this year in dollar terms (to 7 September). For a sterling investor, the gain is actually 13.3% as the dollar has also gone up by almost 5% against the pound.
One reason for this divergence has been Trump’s trade policies with the rest of the world. The first big round of trade tariffs imposed by the US on Chinese goods were announced in late May, around the same time that the US stockmarket and the rest of the world began to diverge. This timing is probably not coincidental.
Chart one, shows the US market (the red line) versus the rest of the world this year (represented by the FTSE
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