Daily Management Review

$9 Trillion Added To Global Markets As They End 2017 On A Record High


$9 Trillion Added To Global Markets As They End 2017 On A Record High
There have been three major factors that have helped global stock markets to end 2017 on record highs. They have managed to gain about $9tn (£6.7tn) in value during the year. The central banks’ go-slow approach to easing financial support, President Donald Trump’s tax cuts and a strong global economy have been the driving factors.
An all-time closing high of 7687.77 was hit by the FTSE 100 in London following a still higher all-time peak at 7697.62 being hit earlier. The leading UK index noted a 6.7 percent rise through the year and was driven by a renewed positive feedback about the Chinese economy and the late rise in mining shares because of the rise of commodity stocks on the back of a weaker dollar.
An all-time high of 514.53 was hit by the MSCI all-country world index – in terms of the global performance, where the index gained a total of 22 percent amounting to about $9 trillion on the year. And the party mood among investors was no dampened by headwinds such as an inconclusive German election, political turmoil in Europe especially due to the Catalan movement in Spain, and rising fear of an imminent war with North Korea. There were also rival attractions from bitcoin which rose as much as 14 times during the year.
This year barring nine, the rest of 73 bourses that Sydney-based fund manager CommSec tracks globally have noted gains in terms of local currencies, said Craig James, chief economist at CommSec. He added that the benign approach for the reduction of their financial support by central banks would be one of the keys for next year. An example is the gradual increase of interest rates this year by the U.S. Federal Reserve and Bank of England. In recent years, for investors and asset prices, a major support has been the quantitative easing and the low interest rates. Buying of bonds by central banks from financial institutions is termed as quantitative easing.
“For the outlook, the key issue is whether the low growth rates of prices and wages will continue, thus prompting central banks to remain on the monetary policy sidelines,” said James. “Globalisation and technological change have been influential in keeping inflation low. In short, consumers can buy goods whenever they want and wherever they are.”
Investors looked at President Trump’s political agenda very closely in 2017. Hopes that companies would make use of the financial gains from the US president’s tax reforms to return some of it to the shareholders or engage in business expansion reigned galore. Sentiments were also helped by a slew of mergers recently including the takeover of Rupert Murdoch’s 21st Century Fox by Disney for$66 billion, the $25 billion acquisition of shopping centre specialist Westfield by France’s Unibail-Rodamco and the GVC-Ladbrokes Coral deal agreement.
Craig Erlam, senior market analyst at online trading group Oanda, said: “The FTSE 250 started on the back foot at the start of the year compared to the FTSE 100 [due to Brexit concerns], with sentiment towards the UK economy being more pessimistic than it is now. As the year has progressed though, it’s become clear that the economic downturn in the UK has not been as severe as some feared while progress in the negotiations provides hope for domestic stocks, benefiting FTSE 250 companies over the FTSE 100.”