Plunging dollar erodes non-US investors’ returns
Print This Story
November 19th, 2009 by Prieur du Plessis, Investment Postcards from Cape Town
Twitter It! | Email This Article
With the US dollar falling down a precipice, spare a thought for non-US investors invested in US stocks and bonds.
The graph below shows the performance of US 10-year Treasury Notes since the beginning of March in both US dollar terms (red line) and euro terms (blue line). Whereas US investors are showing a poor return of -2.8% for the period, European investors are completely under water to the tune of -17.5%. For the year to date the figures are -4.8% (US dollar) and -10.5% (euro). (Although I am using the euro in this example, the same logic applies to most other non-US dollar currencies.)
Source: StockCharts.com
The next graph illustrates the same principle for equities by comparing the performance of S&P 500 Index in US dollar terms (red line) with the same Index from the viewpoint of a euro investor (blue line). Whereas US investors have every reason to be very pleased with a return of +64.1%, euro investors are lagging quite far behind with +39.2%, which becomes more pronounced when compared to a return of 55.4% for the European Top 100 Index. For the year to date the figures are +22.9% (S&P 500 - US dollar), +15.6% (S&P 500 - euro) and +21.9% (European Top 100).
Source: StockCharts.com
It is understandable that European investors are not ecstatic about the greenback’s slide and will keep having reservations about committing funds to US assets until they see signs of the dollar forming a bottom.
Dr. Prieur du Plessis is an investment professional with 26 years' experience in investment research and portfolio management. More than 1,200 of his articles on investment-related topics have been published in various regular newspaper, journal and Internet columns, including his blog, Investment Postcards from Cape Town. He has also published a book, Financial Basics: Investment. Prieur is Chairman and principal shareholder of South African-based Plexus Asset Management, which he founded in 1995. The group conducts investment management, investment consulting, private equity and real estate activities in South Africa and a number of foreign countries. He also serves as Honorary Consul of Slovenia for South Africa, actively developing economic, cultural and scientific relations between Slovenia and South Africa. Prieur is 54 years old and live with his wife, television producer and presenter Isabel Verwey, and two children in Cape Town, South Africa. His leisure activities include long-distance running, traveling, reading, motor-cycling and scripophily. Read more from the author/contributor here.
Related Posts
Chart of the Day: Lending Still Shrinking
Bonds & equities: Expect a major shift
Words from the (investment) wise for the week that was (Dec 29, 2008 – Jan 4, 2009)
Tags: 10 Year Treasury Notes, 4th Quarter, Basis Points, Canada, Cboe Volatility Index, Dow Jones, Dow Jones Industrial, Dow Jones Industrial Index, Emerging Markets, Financial Markets, FTSE, Ftse Index, Global Economy, India, Japanese Trade, Msci World Index, Nikkei 225, oil, Percentage Decline, Rout, September 29, Single Day, Trade Weighted Index, Treasuries, Volatility Index Vix, World IndexPosted in Bonds, Commodities, Credit Markets, Economy, Emerging Markets, Gold, Markets, Oil and Gas, Outlook, US Stocks |
