Edward Jones’ Post

U.S. equities closed strongly in what was otherwise a challenging August for markets. Value stocks were temporarily boosted by rising long-end yields, but Growth stocks reasserted their dominance toward the end of the month on softer labor market data. Read more in our #marketminute: https://bit.ly/3sAa5KX

Chart of the day – Global Z-Score valuation implies a significant overvaluation of the global stock market My global Z-Score valuation indicator of the global stock market, based on the global equity index MSCI All Country World, is calculated as the average of the Z-Scores of four key valuation multiples: P/E, P/B, P/S and EV/EBITDA, based on the time-series since 1995. At the moment the valuation indicator value is +1.5 standard deviations. This means that the global stock market seems to be quite significantly overvalued. With that being said, +1.5 standard deviations also imply that if the global stock market valuations were to mean-revert in the upcoming period there would currently be approximately a 20% downside potential. However financial markets have also a strong historical tendency to overshoot and undershoot the historical average valuations which means that the downside potential could be even higher. Equities can for sure continue their rally into the second half of 2024. However, in my opinion, if this upward movement continues, the probability of a significant correction will be growing every other day, especially taking into account the fact that 1) the global economy growth momentum seems to be peaking right now based on global PMI indices and 2) the significant weakening of global economic data positive surprises based on the Citi Global Economic Surprise Index.

Global equities and bonds experienced significant declines in one of the worst October performances in years, due to rising Treasury yields. 1. Small-cap stocks were more adversely affected by rising yields compared to larger counterparts, as seen in the performance of market indexes versus Dimensional equity funds in October. 2. Despite market challenges, it is advisable to adopt a longer-term outlook and exercise patience, as strategies such as value and size-tilted equity funds may require time to prove their worth. 3. Uncertainty surrounding inflation remains a primary driver of market volatility, and understanding and navigating this uncertainty is crucial for making well-informed investment decisions. For the complete market review, you can visit:

We update today’s table on a regular basis to provide insight into the variability of sector performance by market capitalization. In our view, despite their stretched valuations, large cap stocks could benefit from investors seeking strength if U.S. economic data deteriorates over the next few quarters. https://lnkd.in/eBbagAY9

Equity markets are off to a good start this year, with stocks globally continuing to ride the momentum that began in earnest at the end of 2023. With rising confidence in the economic outlook, there is the potential for more active and selective investors to continue enjoying the view from the top in the months to come. Learn more in our quarterly commentary: https://lnkd.in/g7XMFVmS

“Goldman Sachs projects that U.S. equity market capitalization will fall to 35% of the overall global market by 2030. Meanwhile, emerging markets, including China and India, are collectively forecast to reach the 35% mark in the same timeframe. By 2050, the EM share is anticipated to far surpass the U.S., rising to 47% of global stock markets.” A quite pessimistic scenario, however a good display of the current landscape.

https://lnkd.in/dfRbvSjP If the growth in the global stock market are going to come from emerging markets 20230+ why then do we continue to see IS$ centric capital allocation, how much of the prediction rest in a recovery of markets, growth & trust?

We track ten markets in our global equities model. The Dow, S&P and NASDAQ in the U.S.A, the FTSE, CAC and Dax in Europe. In Asia, Nikkei, Hang Seng, Shanghai and BSE feature. This is our review of 2023. Global equity markets experienced their strongest year since 2019, with the MSCI World index, a broad gauge of global developed market equities, surging by 22%. This performance was driven by a strong rally towards the end of the year, as investors anticipated that major central banks had finished raising interest rates and would implement significant rate cuts in 2024. In the United States, the NASDAQ led the way with a 43% increase, followed by the S&P 500 index with a 24% rise, and the Dow Jones Industrial Average with a 14% gain. This growth was largely driven by a shift in interest rate expectations, as recent data showed inflation falling faster than expected in western economies. The Federal Reserve signaled the possibility of substantial rate cuts in 2024, which further fueled this optimism. European stocks also performed well in 2023, with the German DAX and French CAC indices rising by 20% and 16.5% respectively. However, the FTSE lagged behind, closing just above the 7700 level, for a 4% gain in the year. Asian markets had a mixed performance. The Nikkei index in Japan surged by 28%, and the BSE index in India was up by 19%. However, concerns about the investment outlook in China led to a 4% fall in the Shanghai index and a 14% drop in the Hong Kong Hang Seng. A handful of big technology stocks, known as the "Magnificent Seven" (Apple, Microsoft, Alphabet, Amazon, Tesla, Meta, and Nvidia), drove a large part of the gains on Wall Street in the year. Looking ahead to 2024, some investors believe that markets may be pricing in too much optimism that inflation will continue to trend lower without the US economy slipping into recession. Expectations of significant rate cuts in the USA and UK could be overblown. The 40% gain in NASDAQ stocks may need a period of repricing before further gains are possible. Keep up to date with all of our updates in 2024. Join The Mailing List ... Don't Miss Out Monday Morning Markets ... And Much More ... https://lnkd.in/gKaBuYv

The markedly lower concentration risk of small-cap stocks suggests that adding them to large-cap portfolios could be a potentially diversifying strategy. Find out the two ways to measure concentration risk - http://ms.spr.ly/60459txB5 #MSCIResearch #equities

For global investors, the most relevant, in our view, are emerging market equities, equal-weighted US stock indexes, value stocks, and defensive sectors