Opportunities and Risks in Diverging Performance
Global equity markets continued to advance in the third quarter, shaking off an early September pullback, as investors were encouraged by the global monetary and fiscal response to the COVID-19 pandemic, the reopening of some economies, and accelerated vaccine development. Ten of the 11 sectors in the MSCI All Country World Index (ACWI) delivered positive returns, bringing the global benchmark above where it started the year.
The United States helped drive the market recovery as the promise of supportive long-term inflation and interest rate policy boosted market confidence. Companies also witnessed a strong snap-back as the economy reopened, with a high proportion of businesses beating earnings estimates for the second quarter.
On the political front, U.S. tensions with China deepened when the White House cracked down on Chinese-owned apps and tech companies over data-sharing concerns. Contentious U.S. election campaigning added to domestic and international uncertainty, leading to investor fears of a spike in volatility over a potentially disputed result.
MSCI All Country (AC) World measures equity performance of developed and emerging markets. MSCI EAFE® measures developed foreign market equity performance, excluding the U.S. and Canada. MSCI Europe measures equity market performance of Europe’s developed markets. MSCI Japan measures performance of the Japanese market’s large and mid-cap segments. MSCI AC Asia Pacific ex Japan measures equity market performance of Asia’s developed and emerging markets (excluding Japan), Australia and New Zealand. MSCI Emerging Markets measures equity market performance in global emerging markets. MSCI AC World ex US measures equity performance of developed and emerging markets, excluding the U.S. S&P 500® measures performance of 500 of the largest U.S. companies. All indexes are free float-adjusted market cap-weighted and calculated on a total return basis with dividends reinvested.
The commentary is the opinion of Vontobel Asset Management. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.
Past performance is no guarantee of future results.
All investments carry a certain degree of risk, including possible loss of principal.