News and Research
Following three years of double-digit returns, global equity markets declined in the first quarter as market volatility and geopolitical risks increased. Policy makers must now balance combating inflation with maintaining positive economic momentum and global economic growth estimates have started to shift lower.
Global equity markets delivered a third consecutive year of double digit returns in 2021. The OECD expects global GDP growth to moderate to 4.5% in 2022 which is still above long term trends. SGA sees many opportunities in equities today but anticipates volatility into 2022.
The New Year is a time to reset, examine the past and, more importantly, to assess the future with a clear mind and a blank sheet of paper. In this paper we look beyond SGA’s own investment strategies to set a broader stage for thinking about the best way forward in 2022 and beyond.
Global equity market returns were modestly negative in the third quarter as volatility increased. The Delta variant led to a resurgence in global COVID-19 cases while economic data was mixed. We view stimulus tapering programs as a sign of confidence that the global recovery remains on track.
Global equity markets were resilient in the second quarter as inoculation efforts were productive. Global stocks performed well, and market leadership rotated between value and growth. Earnings growth and strong company fundamentals will likely be supportive of global equities.
Major equity market returns were overall positive in the first quarter with notable outperformance in value over growth, as rising fixed income yields posed a risk to elevated equity valuations. Moving forward, we expect a gradual shift towards normalcy in many developed regions, as an increasing supply of vaccines coupled with sizeable fiscal stimulus plans may lead to a surge in global economic growth.
Following the largest economic declines since the Great Depression, the recovery has exceeded earlier expectations with the promise of several successful vaccines in the fourth quarter supporting a positive 2021 outlook. The full effect of monetary and fiscal stimulus policies is likely to extend throughout next year, with growing optimism that pent-up consumer demand for service industries hampered by restrictions could deliver a wave of growth.
In the third quarter, most major equity benchmarks delivered positive returns, extending the recovery off March lows. Corporate earnings are projected to stage a sharp rebound from the declines reported in the second quarter and are estimated to recoup much of those losses by the end of 2021.
In the second quarter, the MSCI World Net Index advanced 19.36% overcoming mixed economic data, climbing infection rates, and escalating political tensions.
In the first quarter, global equity markets retraced several years of gains and declined to levels not seen since the end of 2016. Global volatility is likely to remain elevated despite large and coordinated global fiscal and monetary stimulus packages.