International Equities At Year-End 2020 & The Promise Ahead

Businessman, Internet, Continents

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During March and April of this year, the global economy and equity markets were hit with a severe shock from the COVID-19 pandemic and the widespread lockdown measures governments imposed in response.

In May and June, the spread of infection lessened in many economies, lockdowns were largely ended, and restrictions eased. Equity markets started a strong recovery, and global economic growth in the third quarter bounced back significantly, but not enough to counter the decline earlier in the year.

During the final quarter, the virus flared up dramatically, including in some countries that had been relatively successful in curbing the virus earlier, such as South Korea and Japan. Restrictions were reimposed in many countries, impacting services heavily yet having a more moderate effect on industry. The recovery in most economies moderated in the fourth quarter, with European economies again contracting.

Nevertheless, global economic growth remains solid. November global manufacturing production grew at the fastest rate in 34 months, while the growth in global services sector activity was just slightly less than the October pace, according to the JP Morgan Global Composite PMI. December economic activity may be slightly weaker.

For the year of 2020, the global economy is estimated to have declined 4%, with only China and Taiwan among the major economies registering positive growth rates for the year. Both advanced-market economies and emerging-market economies excluding China averaged declines of more than 5%.

Global equity markets, however, continued to recover in the fourth quarter, apparently looking forward to a more positive 2021, including the promise of effective COVID-19 vaccines widely administered. Continued massive fiscal outlays and accommodative monetary policies with very low interest rates are expected to provide crucial support for equity prices.

In the face of widespread declines in economic activity, the performance of global equity markets this year was impressive. The year-to-date December 14 gain on a total return basis in the all-country MSCI ACWI Index was 13.05%. Along with the strongly performing US market, international markets overall had a positive year, with the all-country MSCI ACWX ex US Index advancing 7.88%. The performance of individual national markets varied widely.

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Disclaimer: The preceding was provided by Cumberland Advisors, Home Office: One Sarasota Tower, 2 N. Tamiami Trail, Suite 303, Sarasota, FL 34236; New Jersey Office: 614 Landis Ave, Vineland, NJ ...

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