Will the Global Stocks Improve in 2019?

Will the Global Stocks Improve in 2019?

Most investors would like to forget the year 2018. The stocks had performed worse in a lot of countries particularly in Asia and Europe. This has been due to a slowdown in the economic activities in China, Germany and the US.

The Sino-US trade wars, strengthening dollar, Brexit fears, and oil price hike had further contributed to the decline in global economic growth.

Experts are divided as to how the year 2019 will unveil in terms of global stock market growth.

Optimistic View of Global Stock Market Growth in 2019

The remarkable rally in stock markets this year shows that investors are confident about the investment prospects in 2019.

The bulls have bounced back from a sell off induced by an overly pessimistic outlook on global economy.

The international markets have all rallied at the same time in the first three months of this year. This is in part by the reluctance of central banks to end easy access to money after the 2008 financial crisis.

iShares MSCI Emerging markets have increased by 10 percent this year. The Europe 6000 has posted an increase of 12.9 percent, while Brazil’s BOVESPA index had gained 12.8 percent so far in 2019.

Shanghai Composite Index has posted a remarkable 21.2 percent increase this year.

A survey by Reuters revealed that analysts have predicted nine of the sixteen major indexes will likely trade higher by the end of this year.

The S&P 600 has gained nearly 8 percent in January, which is the the best start since 1987. A turnaround by the Feds in January this year has been credited with soothing the worries of investors in the US.

Investigating the Reasons Behind the Stock Market Rally

While the IMF’s World Economic Outlook report has predicted a slower growth this year at 3.5 percent, some experts are saying that the gloom is behind us.

Experts have pointed out a lot of comforting developments that point to a revival of the global economy.

China’s stimulus efforts top the list of abating worries regarding the global economy. The stability in the eurozone and reduced tensions about the Sino-US trade wars are other factors that show that the worst is behind us.

The rosy outlook about the world’s economy is one of the factors that has led to bulls to dominate the market at the start of this year in major markets.

Oil price recovery has also been a key factor in the global stock market revival. The rise in oil signal expectations of economic growth. Oil prices have risen to record high this year. This has pushed the prices of several energy stocks including Chevron Corp. and Exxon Mobil Corp. that have increased by 19.1 percent and 21.3 percent, respectively, from their lows.

Another factor that is propelling the stock index is improved business sentiments. In the US, industrial stocks have been one of the best performing sectors in S&P increasing by 18 percent as compared to the previous year. This represents the best rally by industrial stocks in the past six years. 

Previously, industrial stocks had led the entire quarter in 2013.

Hopes of an added boost from China-US trade deal has also led to a rally in industrial stocks in both the countries.

However, some experts are saying that the rally in stock markets are nothing more than recovery after a big sell off by the bears at the end of the year. They point out that history is replete with examples of these ‘bear market’ rallies.  

Still others point out robust economic data particularly in the US. During the month of January, there were 30400 new jobs. Moreover, unemployment rates have increased to 4 percent, which is the highest since mid-2018.

In China, the rally is due to optimism regarding the China-US trade deal.  The stimulus program by the Chinese government has also emboldened investors to put their money in the Chinese equity market. Chinese blue-chip companies had posted the highest increase of the year. The optimism about the trade deal has also resulted in gains in the Yuan currency that had increased to a seven-month high.

Receding fears about the global inflation levels has also led to a renewed optimism in the stock market.

A surprising fact about the market is that companies are also pushing the prices of their stocks higher. Investments firms flush with improved cash are buying their own shares in the US. Buying back the shares allow these companies to return cash invested by major shareholders, boost share prices, and improve financial performance data. The binge has been one of the key factors that have helped sustain a bull rally despite political and economic turbulence contrary to the predictions of the analysts.

Going Forward

Most stock investors have seen their fortune rise due to a remarkable rally at the start of this year. The global stock performance in the months ahead will depend to a large extent on the how the US-China trade talks will unwind.

In addition, the strength of the US dollar and the reaction of the Feds will also influence stock market in the US.

Globally stock market performance will be influenced by China’s economic performance. Moreover, the Brexit and oil prices will also affect stock market performance.

The year has been off to a terrific start for stock market investment and the outlook remains generally positive. The fundamentals appear sound and point to a much better stock market performance this year. Investors are advised to buy quality stock of companies with stable revenues and growth projections.

Experts say that investors should also keep a level of caution.

Traders should carefully watch news about hints of the Fed Reserve policy plans. Also, investors in the US should look for positive comments about the future size of the balance sheet and future hikes in the rates.

Investors should remain optimistic but also brace themselves for unexpected setbacks. The view should be on the long-term horizon and avoid panic driven decisions.

Views are strictly personal. This Interim Financial Results & News posts or updates includes forecasts, projections and other predictive statements that represent Vtrade's assumptions and expectations in light of currently available information. These forecasts, etc., are based on industry trends, circumstances involving companies and other factors, and they involve risks, variables and uncertainties. The Group’s actual performance results may differ from those projected in these Interim Financial Results. Consequently, no guarantee is presented or implied as to the accuracy of specific forecasts, projections or predictive statements contained herein.