Investments / Equities

Private equity trends and future outlook/Southern Africa/SAVCA

Global equity : now is not the time to be bold

The global macroeconomic backdrop is unequivocally positive. Major economies are enjoying a rare period of sustained synchronised growth (last seen in 2010 and before that in 2006) as central banks globally keep interest rates low. In fact, real rates in most G7 countries remain negative. Central banks such as the European Central Bank and the Bank of Japan continue to run quantitative easing programmes, while the US recently cut its corporate tax rates.

Seeing the big picture in market corrections

On Monday, February 5th, the US equity market experienced a sudden bout of volatility. The Dow Jones Industrial Average logged its largest-ever point decline to close down just over 1,175 points, although it had briefly dropped nearly 1,600 points during the day. It was the index’s largest one-day percentage decline since August 2011. The ripples were felt around the world as Asian and European equity markets followed suit on Tuesday, February 6.

Equity and bond markets square off

Buoyed by a supportive macroeconomic backdrop and surging reported earnings, global equities posted the third best January return (5.6%) since the launch of the MSCI All Countries World Index in 1987. The US, where company profits will now get an extra boost from lower tax rates, was the top performing developed market, but the weaker US dollar also boosted dollar returns from other markets. The bull market has finally captured the imagination of retail investors, with equity mutual funds worldwide reporting the best monthly inflows on record, according to Bloomberg.