Repost: Markets Bounce in Q1

Here’s the latest global stock market and economic updates from LOM Financial:

 

Image source: LOM Financial

 

Global markets continued their rebound in March with the MSCI World Stock Index gaining 1.05% and the S&P 500 increasing by 1.79%. The technology sector continued to climb last month but more defensive sectors such as consumer staples and real estate also fared well as interest rates declined. Investor sentiment is currently mixed as relatively strong earnings and a decent macroeconomic environment in the U.S. has been met with weakening demand out of China, an inverting Treasury curve and the ongoing challenges to an orderly British exit from the Eurozone.

 

Equity markets have mostly recovered from last year’s Q4 correction, with the S&P 500 rallying 13.1% since the beginning of the year and 20.6 % from the December 24, 2018 bottom. The MSCI World Stock Index has gained 11.9 % this year and is up 16.9% from the market bottom. Despite positive equity market performance in Europe last month, the region continues to exhibit economic weakness. Italy fell into recession (two consecutive quarters of shrinking growth) while Germany narrowly avoided a recession as it has struggled with falling industrial output, driven largely by the automotive sector.

 

Britain, struggling to find consensus on an amicable exit from the EU, has secured a short extension to the original deadline on the condition of another meaningful Brexit vote. That vote has since failed as British Parliament was unable to agree on any of the eight proposed terms of Brexit. Donald Tusk, the President of the European Council, called for an emergency EU summit after UK Prime Minister May’s proposal was defeated for a third time.

 

The United States and Canada have been relative safe havens during the past quarter. Macroeconomic indicators still appear to be strong on a relative basis. However, economists expect slowing GDP growth in the U.S as the short-term boost from the Trump tax cuts begins to run off. Importantly, the Federal Reserve’s shift to a more dovish stance has been well received in the equity markets. At the start of the year, the Fed was looking at one to three rate hikes, but they have recently indicated they may do none at all. The shift in stance has helped the equity markets regain most of last year’s lost ground. However, the ongoing trade war and return to more protectionist policies around the world continue to keep equity markets on edge.

 

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