Global markets had their best quarterly returns since 2013 during this third quarter. Stocks outside of the US outpaced the S&P 500 by 2.5% beating the US market for the first time since Q1 of 2015. Investors immediate fears about the BREXIT vote repercussions were set aside and their attention was turned towards actions from central bankers around the world.
The United Kingdom’s (UK) vote to leave the European Union (EU) set off a shock wave across the global political establishment and global financial markets. The outcome of the BREXIT vote was unexpected and global stock markets sold off sharply in the days after the June 23rd referendum.
The first quarter sent investors around the world on a wild ride. Stocks started the year off with a dramatic sell off. In the first six weeks global markets fell 12% before staging a furious rally to post only slight losses. Early in the year investors were concerned that energy prices were in free fall, China’s economy was stumbling and the Federal Reserve raised rates prematurely.
Stocks around the world rebounded in the 4th quarter but returns for the year were mostly negative.
Global markets had their worst quarterly performance since the depths of the 2011 Eurozone credit crisis. The turbulent market conditions were largely caused by slowing growth in China, China’s devaluation of their currency, concerns that global economic growth is declining and questions over when the US will increase interest rates.
There is no sugar coating it. Last week was a bad week for stock in the US and around the world. The S&P 500, which represents the 500 largest companies in the US, declined 5.7%. This was its worst weekly decline in almost 4 years (September 23, 2011.) Markets around the world followed suit.
One thing I have learned is that diversification can be an easy concept to explain to clients but difficult for them to embrace. Diversification is typically presented using the analogy of holding all of your eggs in one basket. This is far too simple.
Stocks around the world took a step back in the quarter giving up some gains from early in the year. Investors showed renewed concerns over Greece’s financial situation late in the quarter which lead to the modest sell off. China was also in focus as its market sent investors on a volatile ride. It surged higher by 37% at one point this quarter, eventually settling up 14%.
A common theme I keep hearing from clients, friends and acquaintances is they feel the stock market is running out of steam.
Global markets outpaced US stocks during the first quarter. International markets shrugged off the strong US Dollar and volatility in energy prices to post solid gains. The markets were helped out by widespread intervention from central bankers.