S&P 500 chart on HL?

iwebdewi

Can someone explain why, if you add the S&P500 to a fund chart on HL, it says the index has gained 4.39% in the past 1 year, when on 3/9/21 it was 4,532.42 and today it's 3,924.26. 

dunstonh

Is the HL chart showing it in Sterling or USD?

Exodi

Presumably he's looking at something like https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/u/ubs-s-and-p-500-index-accumulation which is in sterling and comparing it to the S&P 500 index which is in USD.

Exodi

Exodi said:

Presumably he's looking at something like https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/u/ubs-s-and-p-500-index-accumulation which is in sterling and comparing it to the S&P 500 index which is in USD.

Just to expand on this for the OP's knowledge, the pound has sunk dramatically against the dollar in the past year and when the pound performs poorer against the dollar, it counterintuitively boosts sterling investments in US stocks. 

As an example: Company A generates $100m in profit and the current exchange rate is £1 = $1.2. In sterling terms, those earnings are worth £83m. If the pound weakens vs the dollar and £1 = $1.1, those earnings are now worth £91m. The same principle applies to UK companies who generate revenue in other countries, but report in sterling. All being equal, a weaker pound would mean higher sterling revenue.

iwebdewi

Thank you all. You must be right, but tbh I don't 100% understand. 

On HL, I've just plotted ISHARES PLC CORE S&P 500 *USD* UCITS ETF, then added to that the DJIA (I don't think I can add the S&P 500 for some reason). It shows the DJIA as down about 11% over 1 year. 

I then plotted ISHARES VII PLC CORE S&P 500 B *GBP* ACC, then added the DJIA. It also tells me the DJIA is down 11% over 1 year. 

I then plotted a Vanguard LifeStrategy (GBP), then added the DJIA. It tells me the DJIA is up 6.04% over 1 year. 

Help. 

masonic

iwebdewi said:

Thank you all. You must be right, but tbh I don't 100% understand. 

On HL, I've just plotted ISHARES PLC CORE S&P 500 *USD* UCITS ETF, then added to that the DJIA (I don't think I can add the S&P 500 for some reason). It shows the DJIA as down about 11% over 1 year. 

I then plotted ISHARES VII PLC CORE S&P 500 B *GBP* ACC, then added the DJIA. It also tells me the DJIA is down 11% over 1 year. 

I then plotted a Vanguard LifeStrategy (GBP), then added the DJIA. It tells me the DJIA is up 6.04% over 1 year. 

Help. 

There's two different charting plugins being used here - one for shares and one for funds. The funds one is rebasing everything to GBP before overlaying, while the shares one is not. Plot CSP1 vs CSPX using the 'shares' charting (HL internal plugin) and they show vastly different performances, which is not correct. It cannot cope with items priced in different currencies.

If you start with VLS in order to use the 'funds' charting (provided by Financial Express), then everything is compared in the same currency (£), as it should be:

iwebdewi

So if you're invested in the US (GBP) a depreciating £ is great, except that inflation rises to compensate?

masonic

iwebdewi said:

So if you're invested in the US (GBP) a depreciating £ is great, except that inflation rises to compensate?

Yes, exactly. Imports and raw materials become more expensive in local currency (just like foreign investments appear to be rising in price), and those increased costs will have a knock on effect on inflation. Investing in non-Sterling assets will protect the value of your capital against a devaluing currency, but it doesn't tend to make you better off (just relative to other UK folk whose capital is in the bank).