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RETAIL REPORT: Morningstar Shares Five Global Market Trends

Traders Magazine Online News, November 7, 2018

Morningstar recently published its latest Markets Observer report.

With data as of Sept. 30, the firm’s market analysis covers equities, fixed income, funds, and the economy. In it Morningstar shares five global market trends to watch.

To See the Ful Report, please click here

•             U.S. economic growth boomed in 2018. The first estimate of third-quarter GDP growth showed the U.S. economy growing 3.5 percent, following a 4.1 percent expansion in the second quarter. Labor market indicators remain historically tight, and while wage growth has not accelerated significantly, it remains on solid footing. Corporate and personal tax cuts have provided an economic tailwind.

•             Fed policy and inflation expectations have driven interest rates higher across the curve. With further tightening in the labor market and a slow yet steady rise in inflation, Federal Reserve officials have signaled that they intend to continue increasing the Federal Funds target range in the coming quarters to prevent the U.S. economy from overheating.

•             U.S. equities and commodities outperform other asset classes. Ongoing economic strength in the U.S. coupled with elevated earnings expectations drove U.S. equities to return nearly eight percent in the third quarter of 2018, as broad market indices touched new nominal highs.

•             Commodity producers excel, minus Southern Europe. Commodity producers such as Russia, Australia, Norway and, to a lesser extent, Canada, have all benefitted from relatively strong commodity returns over the year through the third quarter, including some U.S. firms. Italy, Greece, and Spain have weighed heavily on developed-market returns despite relatively strong performances across the rest of Europe.

•             Some emerging markets have remained resilient despite broad market pressure. Countries with large current account surplus have generally done better than their peers, but even among those countries with wider current account deficits, equity and bond markets have been more resilient than in 2013 during the “taper tantrum.” Rather, country-specific developments appear to have been more important than broad macro trends. This may change if U.S. rates move swiftly higher. 

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