Equities Market Perspective: Mind the gap: US vs ROW

09/10/2018

  • Global equity markets made positive gains in September, with the US and Japan racing ahead
  • scalating trade tensions between China and the US, as well as dollar strength and expensive oil continued to weigh on Asia ex Japan and Emerging markets
  • Energy dominated sector returns supported by a strong oil price, alongside telecoms and healthcare
  • In a trend reversal, technology lagged, with a growing divergence between US and Chinese internet leaders
  • Oil posted the longest string of quarterly gains in more than a decade, as market concerns grow about Iranian sanctions and an impending supply crunch

Theme: Mind the gap: US vs ROW

  • Global equity markets sit at an important juncture. The outperformance of US versus the rest of the world has now hit historical extremes
  • Global growth in aggregate remains robust, but patterns are no longer synchronized
  • The latest Bank of America Merrill Lynch fund manager survey shows the largest overweight to US equities since 2015
  • The US still retains comparative advantages, but with relative outperformance and valuations looking extended – is all the good news now priced in?
  • What will narrow the gap? A pull back in the US or will the rest of the world play catch up?
  • The performance divergence may unwind as confidence in the earnings outlook improves outside of the US

The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested. Where past performance is referenced, please note that this is not a guide to future performance.