Equities market monthly

After a torrid end to 2018, equity markets stabilise

Key points

 

  • 2019 has started on the right foot after December’s sell off amid thinly traded markets
  • Positive surprises from the fourth quarter earnings season would help break the ongoing negative feedback loop between equity prices, confidence and investment
  • Negative investor sentiment seems to be bottoming out and valuation multiples are now back to near 2015-2016 lows

Risk rebound in January following December slump


2018 was a challenging year with global equity markets falling 7.2%. Latin America was only major regional equity market in the green (+4.2%) while Japan (-14.9%), the euro area (-12.1%) and emerging markets (-9.7%) faced heavy drawdowns.

On the sector front, defensive plays outperformed with utilities (+4.4%) and healthcare (+3.4%) leading the pack while cyclical sectors, such as industrials (-12.7%), financials (-12.5%) and materials (-12.1%) lagged the benchmark. In terms of styles, growth outperformed value by close to 3.6% globally (Exhibit 2).

December witnessed the largest sell off in a calendar month for the S&P 500 since the 2008 global financial crisis amid thinly traded markets. Volatility levels were disrupted in the fourth quarter of 2018 with the CBOE Volatility Index (VIX) trading at a daily average of 21 and peaking at 36 in December. Although it is only two weeks old, 2019 has started on the right foot with global equities up 2.8% year-to-date.

 

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