Why is the Stock Market So Divided?

Investment returns seem to fall into two distinct camps this year - very good or very bad. Is this dispersion justified? Or have markets become exaggerated

Emma Morgan 5 November, 2018 | 2:13PM
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From a performance perspective, markets continue to experience mixed conditions that carry an undercurrent of emerging-markets instability and US strength. This is consistent by broad asset class–whether we are talking about equities, fixed income or currency – but also in rhetoric. Looking at equities first, the performance numbers have been reasonably resilient, albeit with significant dispersion.

On a strict US versus emerging markets pairing, emerging markets continue to be pressured and have done since they peaked in January. Most recently, we have seen a small bounce back, helped by a Russian boom of over 10% in September, but offset by market stress in India, which fell almost 10% over the same period – in US dollar terms, even worse in local-currency terms.

For longer-term perspective, we find that broad emerging-markets equities have delivered 45% over the five years to 30 September 2018, but even less if priced in US dollars at 19%.

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About Author

Emma Morgan  is a Portfolio Manager for Morningstar Investment Management EMEA