Edmund Brandt and Ed Walker write in their capacity as investment directors. Their asset allocation views are based on a 12-month time horizon and reflect the input from various investment teams within J.P. Morgan Asset Management. The discussions are considered with Edmund and Ed ultimately producing their views on the regions in terms of underweight, neutral or overweight.
No seasonal rally for equity markets in December
The MSCI World Index declined 2.2% in December in local currency terms. The first US rate rise for nine years was widely anticipated and easily digested by markets at the time. European markets performed worst among developed peers, declining 3.8% with little differentiation by country, as a scheduled European Central Bank (ECB) announcement regarding future monetary policy disappointed in size and scope. Emerging markets continued to falter given the weak commodity backdrop, with the MSCI Emerging Markets Index down 2.2% in US dollars and 1.1% lower in local currency terms. Commodity importers, such as India and Indonesia, registered positive returns, while commodity exporters Russia and South Africa declined 10.3% and 10.5% in US dollars, including the impact of currency weakness.
2015 was a disappointing year for equity investors overall, following a promising first few months. In local currency terms the MSCI World and MSCI Emerging Markets indices registered negative returns of -2.2% and -5.8% respectively. The US was essentially flat (+0.7%), whereas both Europe ex-UK and Japanese stocks registered positive returns in local currencies. However, the weakness of the euro transformed a positive return of 4.9% in local currency into a 2.8% loss in US dollars. On the other hand, strong returns for the Japanese market of 9.6% were maintained in US dollar terms as the Japanese currency maintained its value over 2015.
Coming up in the Bulletin
- Growth is the watch word…
- 2016 is likely to offer opportunities to re-risk, but just not yet
- Commentators are mostly cautious for 2016, which we view as potentially bullish
- Asset allocation
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