For all the angst about trade wars, geopolitics and a sputtering and overly indebted global economy, 2019 might just be the best year investors have ever had.
The numbers are staggering. Global stocks have piled on more than $10 trillion, bonds have been on fire, oil has surged almost 25%, former crisis spots Greece and Ukraine have top-performed, and even gold has sparkled.
Wall Street and MSCI’s near 50-country world index <.MIWD00000PUS> have both stormed to record highs after 30% and 24% leaps. Europe, Japan, China and Brazil are all up at least 20% in dollar terms too. Not exactly shoddy.
A mirror image of 2018, when almost everything fell? Perhaps. But there have been a couple of important drivers.
One was China showing it was serious about stimulus for its $14 trillion economy. The other was the screeching change of direction by the world’s top central banks, led by the Federal Reserve, which cut U.S. interest rates for the first time since the financial crisis more than a decade earlier.
“Whereas a year ago the Fed was raising rates and earnings were rolling over, this year you have felt the Fed has been on your side,” said James Clunie, who manages asset firm Jupiter’s Absolute Return Fund.
“They are willing to do QE4 at a stock market (record) high, which is extraordinary,” he added, referring to Fed efforts to bring down a spike in money market rates that some suggest could presage a fourth round of quantitative easing asset purchases.
Despite almost daily Brexit chaos, the loss of another prime minister and a snap election, UK gilts have returned 4.5% and a near 6% rise could land sterling its best quarter since 2009.
In contrast, the Fed’s pirouette and easing of trade tensions means the dollar index is about to experience its worst quarter in 1-1/2 years. It is still clinging to a 1.5% gain for the year, though, meaning it will be the euro’s fifth red year in six.
As usual the big swings have been in emerging markets. Argentina’s peso and Turkey’s lira, 2018’s punchbags, have taken another beating. Argentina’s woes have worsened such that it is restructuring its debt again while Turkey’s worries have not really gone away.
At the other end of the spectrum, a new president and a new reform agenda have seen Ukraine’s hryvnia rocket 19%. Russia’s rouble is up 11% and Egypt’s pound is sandwiched in between with a 11.7% gain.
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