After a turbulent summer, September proved relatively calm in global equity markets. The S&P 500 ended the month a little below 3000 points, after flirting with its historic highs in mid-September. Most other indices took their inspiration from the leading U.S. benchmark, trading within relatively narrow ranges, and only edging upward slightly for the month. As we enter October, most equity markets have reached levels that are at or above our September 2020 index targets.
However, there was plenty of equity movement beneath the index level. In early September, we saw a rapid, albeit short-lived rotation into value stocks. Value stocks are strongly reliant on current earnings and dividends, and had been out of fashion compared to growth stocks for quite a while. The recent reversal appears to already discount a potential stabilization in the macro-economic environment later on this year.
Alas, the global economic outlook remains mixed at best. In export-sensitive Germany, the Composite Purchasing Managers' Index (PMI) fell to its lowest level in seven years, according to IHS Markit. Political risk, surrounding Italy and Brexit, receded somewhat. Simultaneously, the attack on two major Saudi-oil-processing facilities showed how fragile parts of the global energy infrastructure are. And, the chances for a quick resolution on the lingering trade conflicts between the United States and China remained distant, with short-term mood shifts frequently triggered – and reversed – by tweets of U.S. President Donald Trump.
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