Our monthly market update and portfolio positioning commentary.
During the first quarter of 2019 the global economy saw a renewed appetite for risk after the poor end to 2018, which subsequently saw equities deliver strong returns. However, the performance of the S&P 500 since the start of the year has been almost entirely driven by a re-rating of stock valuations, rather than an expansion of corporate earnings expectations.
The equity market turnaround persisted for a second month, with global equity markets now having recovered roughly 75% of the losses from the last
quarter of 2018.
January was a uniformly positive month for major equity markets, with the MSCI All Country World Index returning 7.9%. Most of this performance can be understood as a rebound from a particularly poor fourth quarter 2018.
The 4th quarter of 2018 delivered some of the worst returns risk assets have experienced since the financial crisis, with the MSCI All Country World Index down by 12.7%. This is primarily due to slowing global growth, reduced global liquidity, trade protectionism and political gridlock.
October finished as the worst month for global equities since 2012. All major markets closed lower over the month. Ongoing geopolitical risks diminished investor sentiment, whilst concern grew that corporate earnings had peaked for the cycle.
The global economy continues to grow above trend, with the U.S. leading the major economies and outperforming expectations. Strong U.S. performance was driven by the healthy economic environment leading the S&P 500 Index to return 7.7% over the quarter.