Question

Briefly comment on the performance of the leading global equity markets in 2018 so far. ( approx. 100 words each)
You should cover the performance of:
a. US
b. Japan
c. Eurozone
d. UK

Answer 1

• US equity market: DOW industrials was the best performing stocks of 2018 & S&P 500 was the worst performing stock. For the year the S&P 500 fell 6.2%, Dow dropped 5.6% & NASDAQ 3.9% the worst for all the three since 2008. Every investor was humbled in 2018 as the US stocks moved upside down. Investors also experienced a decline in the returns though the US REITS & the dollar recorded total returns in excess of 4.5%. There were also declines in bonds, gold, oil, preferred stocks & US equities along with emerging market indices. There were no alternatives to equities as the investors saw the asset classes across the board under pressure.
• Japanese equity market: Japanese stocks were also not reflecting positive. The topix entered a bear market in 2018 dropping more than 22% from its Japanese peak to a two year low. The index closed out with a worst performance in the past 59 years & the investors have sold more than $48 billion of shares. There are also companies that have reported record [profits in the recent quarters. The return on equity for MSCI Japan index has doubled to 9.8% from 4.4% in 2012. According to a prediction, the ROE could reach 12% by 2025.
• Euro zone equity market: Euro zone equities posted positive returns in the second quarter. Top performing sectors included energy, information technology and healthcare. Financials were among the main laggards, posting a negative return; Italian banks in particular struggled amid political uncertainty in May. Elsewhere, auto stocks fell against a backdrop of intensifying trade concerns as US President Trump threatened tariffs on imported vehicles. The quarter was marked by the return of political risk. There were concerns that Italy could need fresh elections following the inconclusive outcome of the March vote. Markets feared that this would turn into an effective referendum on Italy’s membership of the euro. However, a governing coalition was eventually formed between populist parties, the League and the Five Star Movement. Spain also saw a change of government, although this was largely greeted with calm by markets. Late in the period, German Chancellor Angela Merkel clashed with sister party the CSU over immigration policy. Economic data from the euro zone pointed to steady growth but at a slower pace than last year. GDP growth for the first quarter was 0.4%, down from 0.7% in Q4 2017. However, the flash euro zone composite purchasing managers’ index for June came in at 54.8, an improvement on the 18-month low of 54.1 seen in May. The European Central Bank (ECB) announced that it expects to end its quantitative easing programme in December 2018. The ECB added that interest rates will remain at current levels through the summer of 2019.     
• UK equity markets: the equity market in UK was little challenging to comment in 2018 because of brexit on the horizon. Equity valuations were considered to be high in UK by historic standards. With inflation rising people were questioning whether the 30 year Bull Run on US treasuries was coming to an end. This is considered to be important because low bond yields can drive high P/E ratios. The value of the shares & the income received from it can go down & the investors had not got the full amount invested. Performance was also affected by currency fluctuations.