Key takeaways from the week

  • Stocks were marginally lower on the week and failed to hold on to strong gains recorded Tuesday. Driving stocks lower on Wednesday was a batch of poor earnings reports by stocks in the consumer sector;
  • However, some of the concerns around softening consumer spending were offset on Friday as the Commerce Department reported that retail sales jumped 1.3% in April, its strongest growth in the last year;
  • The acceleration in retail sales could point to stronger GDP growth in the second quarter compared to the sluggish 0.5% growth witnessed in the first quarter; and
  • We think it likely that the U.S. will post 2.0% - 2.5% GDP growth in 2016, which could provide the footing needed for stocks to climb higher from here.

It's not a holiday

Fears about Brexit, and a certain US Republican party candidate will cause uncertainty in currency markets. Traditionally, uncertainty causes currencies to weaken. What will this mean for your portfolio, and what should you do about it?

Firstly, remember the money you invest has a very different time horizon to the money you take on holiday. Your holiday requirements are very short term and there's not a lot you can do to mitigate those currency movements.

The money you are investing has a longer time frame, so needs a different mindset.

A good default perspective if you're worried about currencies with your investments: only invest in whatever currency you will use the money in. This means you won't suffer any FX woe entering or exiting your plan. Trying to currency hedge is very complex, so avoiding the need to is the best strategy.

If you can't avoid it, or already have a mixed currency portfolio then apply sensible investing philosophy and think longer term. Currency movements are unavoidable. And they move around a lot in the short term, so set yourself a target exchange rate at which point you're happy to switch if required, and then be patient and wait for that to come. Most developed market currencies have an exchange rate which you consider the 'normal' rate – use that as your reference point, picking a target close will likely work out in the longer term.

 

Market data

Equity Indices Value Weekly Change
FTSE 100 6138.5 0.21%
S&P 500 2046.61 -0.51%
Hang Seng 19719.29 -1.94%
Shanghai Composite Index  2827.11 -2.96%
Nikkei 225 16412.21 1.90%
Dax 30  9862.12 -0.08%
Bonds  Value Weekly Change
US 10 yr 1.72% -1.74%
UK 10 yr 1.37% -3.65%
Commodities / Energy Price Weekly Change
Gold $1,273.45 1.50%
Brent Crude Oil $47.83 3.66%
Currencies Majors Value Weekly Change 
EUR-USD 1.1316 -0.94%
USD-JPY 108.76 1.90%
GBP-USD 1.443 0.00%
Central Bank  Rate
Fed Reserve 0.50%
ECB -0.40%
Bank of England 0.50%
Bank of Japan -0.10%
Prices as at Friday 13 May 2016

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