If you think all developed economy stock markets have been losing value this year, you’d be wrong. Year-to-date (as of September 5, 2022), the MSCI United Kingdom index level has gained 0.77% in local currency terms (e.g., British Sterling Pound). Comparatively, the S&P 500 index level has lost 17.66% in local currency terms (U.S. Dollar). However, adjusting for currency exchange rates, a U.S.-based investor using U.S. dollars to buy the U.K. index would have experienced a 14.39% loss due to the USD’s increased value. It offers good perspective that currency exchange rates matter when evaluating relative performance from a domestic versus foreign investor’s experience.
