Key Insights

In this research article we assess the key drivers of performance on global equity markets. We note that significant fundamental dispersion (valuation) created by the 2020 pandemic has led to significant 12 month return dispersions across regions, countries, sectors and styles. The global Emerging markets experienced the highest returns over the 1-year time period compared to developed and frontier markets. In addition, Small/Mid and Value styles outperformed other styles over the short-term period as investors rotated from covid-safe sector to covid-sensitive sectors. This was also consistent across the sector performance in global equities where Materials, Financials and Consumer sectors delivered strong 12-month performance. It was not a surprise to see normalization of volatility trends across major countries as governments and central banks defended covid-19 shock with unprecedented fiscal and monetary policy response.

Significant dispersion between top & bottom ranking nations

Exhibit 1 shows the 1-year annualized returns for different markets. 12 month return for all countries index was clipped at 21.6% with EM (29.49%) outperforming DM (20.60%) and Frontier markets (17.62%). Investors with diverse portfolio exposure have benefited from this recovery in global equity market. At a country level, mid markets like Austria offered the highest returns to investors of 58.42% followed by Sweden (39.52%), Netherlands (37.84%), France (30.54%) and Italy (30.35%). In contrast, New Zealand was the worst performing market over the past 12 months at -8%. Much of this underperformance could be attributed to reversals in Tech stock prices as well as the index heavy weight A2 Milk. The data shows significant dispersion at country level that could reward active managers for their stock selection skills.

Exhibit 1: Emerging Markets experienced the highest positive returns

Picture2-1 Global Equity Market Environment Analysis- Investors Rotate Towards Covid-19 Sensitive Sectors and Themes as Volatility Subsides
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