World Equity Markets Overview and Analysis

Global equity markets have seen significant fluctuations in recent years, with the S&P 500 experiencing a 20% drop in 2020. This decline was largely attributed to the COVID-19 pandemic.

The pandemic led to widespread lockdowns and a sharp contraction in economic activity, resulting in a 3.3% decline in global GDP. This decline was the largest since the 2009 financial crisis.

Many countries implemented fiscal and monetary policies to mitigate the economic impact of the pandemic. The US Federal Reserve, for example, cut interest rates to near zero and implemented quantitative easing measures.

The European Central Bank also took steps to support the economy, including a €1.35 trillion stimulus package.

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The world equity markets are a complex and ever-changing landscape. Global equity markets have experienced significant growth over the past decade, with the MSCI ACWI Index rising by over 400%.

The MSCI ACWI Index has been driven by a surge in emerging market equities, with the MSCI Emerging Markets Index more than doubling in value since 2010. This growth has been fueled by a combination of factors, including economic expansion and increased investor interest in emerging markets.

Investors have been increasingly drawn to emerging markets due to their potential for long-term growth and diversification benefits.

The New York Stock Exchange (NYSE) is the largest stock exchange in the world by total market capitalization of its listed companies, with over 2,400 listed stocks and a total market capitalization of over $22 trillion.

The NYSE is the oldest stock exchange in the US, founded in 1792 under the Buttonwood Agreement.

The NASDAQ is the second-largest stock exchange in the world, listing over 3,000 companies, including many tech giants like Apple and Google.

The NASDAQ is home to many of the world's largest and most influential companies, with a total market capitalization of over $11 trillion.

The London Stock Exchange (LSE) is the largest stock exchange in Europe, with a total market capitalization of over $6 trillion.

The LSE is home to many of the UK's largest and most influential companies, including HSBC and BP.

The Tokyo Stock Exchange (TSE) is the largest stock exchange in Asia, with a total market capitalization of over $6 trillion.

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The TSE is home to many of Japan's largest and most influential companies, including Toyota and Honda.

The Shanghai Stock Exchange (SSE) is the largest stock exchange in China, with a total market capitalization of over $6 trillion.

The SSE is home to many of China's largest and most influential companies, including Alibaba and Tencent.

The Australian Securities Exchange (ASX) is the largest stock exchange in Australia, with a total market capitalization of over $1.5 trillion.

The ASX is home to many of Australia's largest and most influential companies, including BHP and Commonwealth Bank.

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The domestic equity market capitalisation stood at 107 trillion USD at the end of Q3 2023, marking a modest 1.8% decrease from the preceding quarter, Q2 2023.

This figure is a substantial 13.7% surge from Q3 2022, mirroring the market's standing in January, March, and April 2023.

At its lowest in the period from January 2021 to September 2023, domestic market capitalisation was at 94.1 trillion USD at the end of Q3 2022.

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The Americas accounted for 47% of the market capitalisation, APAC for 30%, and EMEA for the remaining 23%.

The Americas region saw a quarter-on-quarter decrease of 1.2%, while APAC and EMEA regions experienced decreases of 3.1% and 1.4%, respectively.

In contrast, all regions experienced year-on-year growth, with the Americas growing by 12.5%, APAC by 9.4%, and EMEA by 22.6%.

Several exchanges recorded double-digit increases in domestic market capitalisation year-on-year, including Nasdaq-US, Japan Exchange Group, Deutsche Borse AG, and Korea Exchange.

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Emerging markets indexes are designed to help you measure returns in rapidly growing economies around the world.

Investors can consider active and passive management as complementary strategies across distinct equity segments, such as emerging markets and small-cap segments.

Global equity mandates are evolving, and our research suggests they may emerge as the "new classic" structure for implementing global equity allocations.

A core-satellite structure can be explored, where the active-passive split extends to each equity market segment to implement the global equity allocation.

Investors seeking greater home-market exposure can manage separate domestic portfolios alongside the global equity structure.

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Global equity mandates are evolving, and it's essential to understand these changes to make informed investment decisions. Investors may consider active and passive management as complementary strategies across distinct equity segments.

The MSCI World Index has seen significant changes in regional weights over time. Japan dominated in the late 1980s, while Europe rose in the early 2000s. Today, the U.S. holds the largest share, representing nearly 70% of the index as of February 2024.

Constructing a diversified global portfolio is crucial in today's markets. The MSCI World Index allows investors to measure the performance of equity markets across developed market countries.

Investors seeking greater home-market exposure can manage separate domestic portfolios alongside the global equity structure. This approach can help investors achieve their investment goals while minimizing risk.

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