For North American and global equities January was a wonderful month. The TSX outperformed and delivered a gain of 8.43%.. As usual the tech-heavy NASDAQ led the pack with nearly 10% returns for the first month of 2019.
This month the MSCI All Country World Index (ACWI) has been added to our summary grid. MSCI has been providing investment research, indices and insights since 1969. Their All Country World Index includes 23 developed markets (Canada, U.S., Western Europe, Australia, Japan, etc) and 24 emerging markets (Brazil, Middle East, China, India, Indonesia, etc). More information on this indicator can be found at https://www.msci.com/acwi.
Including this global index provides a quick snapshot of global equity performance. Most investors have holdings, directly or indirectly, outside of North America. In January, global equities, as represented by the ACWI, also performed well.
A number of interesting, not-so-interesting, new, old and contradictory factors influenced the price of equities in January:
- The U.S. government shut-down caused the slowing U.S. economy to slow even further as 800,000 workers went without pay, some even got time away from work while not being paid. After much political positioning by Republicans, Democrats and the President government operations resumed after the longest budgetary interruption in U.S. history.
- The shut-down occurred after President Trump attached billions in funding for a physical barrier (i.e. wall) on its southern border to the usual budget bill. Politically and in the short-term, at least, Trump did not have the backing of his party, or his base of support, to shutter the government over the issue of border security. The budget bill provides for three weeks of relief, and a shut-down may recur on February 25th.
- Corporations continued to deliver strong earnings. The growth of earnings is slowing, but still remains strong.
- Internationally, Brexit continues to muddle along without true resolution.
What’s ahead for February and beyond?
It was a tumultuous year for North American focused investors. A number of factors contributed to the across-the-board losses in our grid.
- Market volatility, which had been low, continued to increase
- The Chicago Board of Options Exchange (CBOE) publishes a volatility index, the VIX, and after a relatively calm 2016 and 2017, the VIX spiked in February and December of 2018, with most of 2018 higher than the previous two years.
- Should this increased level of volatility continue, the fluctuations of individual share prices and the value of market indices will rise and fall more rapidly
Image 1: Stock exchange table: Mercator Financial Marketing Department
Image 2: Advisor Research Group Inc. and data supplied by https://www.bloomberg.com/markets/stocks
Article Source: Advisor Research Group – Market Update 01.31.2019