Global equities show mixed results in the first half. Inflation, interest rates, and sector performance discussed, with future outlook remaining uncertain.Yesterday was ‘Independence Day’ in the United States; So, I thought it might be appropriate to submit a half-term report on global equities supplemented by some comments and observations on the international bond market, foreign exchange, and the mushrooming activity in cryptocurrencies.
Interest rate increases have been rampant in the last six months, as the main tool to fight inflation. The FED has led the charge implementing increases eleven times to 5.5%-5.75%.The MPC has implemented thirteen increases to 5.5% but were slow out of the blocks in making measurable increases. In essence, interest rates are quite a blunt though effective instrument for Central Banks to stamp on inflation.
The normally ebullient Hang Seng has been caught in a vortex of Chinese politics and the Shanghai Composite illustrates the underperformance of China’s economy by their high standards, post the pandemic. Set out below are the closing levels of the main global indices on Friday 1st July 2023 – year to date.Global indices year to date - FTSE -0.30%, FTSE 250 -3.75%, DAX +14.91%, CAC40 +12.47%, DOW JONES INDUTRIAL AVERAGE +3.84%, S&P500 +16.38%, NASDAQ COMPOSITE +32.74%, NIKKEI225 +29.
Last year, the defence sector in the US and in the UK blazed the trail. House builders were decent ‘Arfur Daleys’. This year they have fallen away, due to the mortgage crisis and the cost of borrowing. On a positive note, some retail brands have strongly performed this year – M&S +48%, NEXT +16% AO World +41%.
Improved corporate governance and greater clarity over ownership of companies has contributed to the NIKKEI’S success this year.