US equity markets surged into year-end, bolstered by strong global economic growth, healthy company earnings and the passage of President Trump’s US$1.5 trillion tax-reform package, described as the biggest US tax overhaul since 1986. In Europe, political uncertainty weighed on stock markets, but economic news continued to impress.
Both the global economy and financial markets are tracking towards their best year since the initial rebound from the 2008–09 global crisis. All this has been despite a more fractious, and unsettled political backdrop. The pickup has also been undeterred by a continued withdrawal of stimulus from the Fed. There are, as always, areas of concern – expansions have yet to become ‘self–sustaining’ in Europe and Japan, persistently weak wages and price inflation are a common theme in many jurisdictions, and China faces some daunting structural challenges.
US equity markets pushed higher in November on the back of solid corporate earnings and synchronized global economic growth, although the European markets retreated in November after two straight months of gains, and the UK stock market fell in November as continued uncertainty in domestic politics outweighed confidence in the UK's economic outlook.
BT Chief Investment Officer Corrin Collocott explores the recent strength of equity markets and the implications for the BT investment portfolios and considers whether equities are now overvalued.
Markets were mostly stronger in October, contradicting investors’ fears that the month of October historically has a predisposition to the negative. Economic data continued to improve in the US, Europe and Japan, while political events in China, Japan and Europe also held markets’ attention but synchronised global economic growth and improving company profits continued to be the driving themes.
Continued signs that the world economy is growing in synchronisation for the first time in 10 years buoyed world markets in September, with improving economic data in the US, Europe and Japan, while China's managed slowdown continues to be closely watched.
Geo-political concerns were front and centre over August, with North Korea ramping up its missile test program, and President Trump in turn ratcheting up his rhetoric, saw 'safe haven' assets see plenty of action while markets remianed steady.
US equities were bolstered by improving corporate profit results and economic data in July, despite ongoing challenges facing the Trump presidency, including investigations into Russian government links and threats from North Korea. However, markets across Europe and Australia were more subdued. The US dollar continued to depreciate against major currencies, with the Euro reaching a 2 ½ year high and the Australian dollar exceeding the 80c mark.
Global equities went into reverse over June as our dollar moved higher at the same time as markets were looking for direction when many indices are at record highs. Losses were centered across Europe while the ASX finished the financial year with a solid 14% total return.