BUSINESS NEWS - South African investors can be forgiven for feeling a little sorry for themselves at the moment. Performance on the JSE has been pretty dire, with the All Share index down 6% for the year to date, and unlikely to improve any time soon.
Making matters worse, while our market is in the red, US indices seem to be going up and up, exacerbating our feeling that the rest of the world is moving ahead while we are sliding backwards.
What is interesting, however, is that South Africa is not alone when it comes to negative market returns. US-based Yardeni Research has compiled an interesting series of charts using MSCI data that show that pretty much the only place to have been this year was in the US, invested in the S&P 500.
This chart, the first of 22 slides that detail global stock market performance, shows that when it comes to global indices, the US was a clear outperformer.
The US is the only market to have moved strongly upwards this year on the back of a strong economy and earnings growth momentum. Given the strength of the USD in relation to other currencies on the back of rising yields in the US, it is perhaps unsurprising that markets underperformed the US when converted to dollars. But even in local currencies, the only markets that standout are Brazil, Russia, Sweden, and Taiwan.
This trend is not new but has been playing out over the last five years, says Kyle Wales, co-head of global equity boutique Old Mutual Titan. In this time the S&P 500 has delivered compound annual growth of 13% versus Europe’s 3.7% and 1.9% for emerging markets (EMs).
While the world has been experiencing a synchronised global recovery since 2016, it is evident that the stronger economies are starting to pull ahead, says Johan Gouws, head of institutional consulting at Sasfin Wealth.
“Emerging economies, specifically China and India, have been driving global growth and are expected to continue doing so. This year sees the US pulling ahead of Europe and Asia, at about 2.9%, according to the IMF.”
