Axiome September update 2017

This year is shaping up be the first time since before the GFC where all 47 countries that make up the world’s main equity markets will be in synchronised expansion.  The OECD forecasts global growth to be around 3.5% for this calendar year, around its long-term trend level, and 3.7% for 2018.

With global inflation still mild and interest rates still very low this is as good as it gets with regards the macroeconomic backdrop for global growth assets.  It has boosted corporate earnings and the outlook is very solid, with double digit earnings growth rates expected for end of 2017 in all the main regions (figure 2).  In addition, market volatility continues to be exceptionally low, with the VIX measure of implied volatility (colloquially known as the “fear gauge”) touching its lowest level since it began in 1990.

Given this backdrop, its perhaps not surprising that global developed market equities (as represented by the MSCI All Country World Index) reached an all-time high in the September quarter.  Within global equities, global small cap stocks outperformed the market over the quarter, while value stocks slightly lagged.  Emerging markets stocks have also fared very well, with returns around 23% in the year to September 2017.