News and Research
Early indications show that global inflation eased due to tighter financial conditions. Commodities reversed early year gains, supporting the fading inflation narrative. Value stocks extended their outperformance over growth stocks.
Global stocks declined on increasing concerns of a more severe global economic downturn. The global growth outlook was revised lower with Europe particularly vulnerable. Market volatility has increased but also creates new opportunities to deploy capital.
Global stocks declined in the second quarter as the macroeconomic outlook worsened. Renewed lockdowns emerged in China while the Russia-Ukraine conflict continued unabated. The World Bank revised downward its 2022 global growth forecasts from 4.1% to 2.9%.
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.
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.