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Global markets rush to all-time highs on optimism

Prominent markets such as the USA, the UK, South Korea, Canada, India and Indonesia are trading close to their record highs.

, ET Bureau|
Updated: Aug 15, 2016, 03.05 AM IST
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Prominent markets such as the USA, the UK, South Korea, Canada, India and Indonesia are trading close to their record highs.
Prominent markets such as the USA, the UK, South Korea, Canada, India and Indonesia are trading close to their record highs.
ET INTELLIGENCE GROUP: The propensity to invest in equities across the globe may have come down over the past few months, but the markets, and the returns from them, tell a somewhat different story.

There have been a few worries of late such as the agonisingly slow growth in profits of companies, the not-so-rosy macro picture, etc., which may have prompted companies to hold back their capital investments, but equity markets across the globe have been on the ascendancy.

Prominent markets such as the USA, the UK, South Korea, Canada, India and Indonesia are trading close to their record highs. The MSCI World market index — a gauge to track global equities — is trading just 4% below its record closing of 1810.
Global markets rush to all-time highs on optimism
All three major US indices — Dow, S&P 500 and NASDAQ — are also trading close to new highs, first time since 1999. Indian benchmark indices, Nifty and the Sensex, are too just 3% away from their record highs, while mid and small indices are already rocking the charts.

The level of optimism in equity markets can be gauged from the fact that 86% of index constituents of Dow are trading above the 200 daily moving average (DMA), and 78% of the Nifty’s constituents are above 200 DMA, according to data compiled by Bloomberg. If a stock is holding above 200 DMA, it is officially seen as an uptrend. If it drops below 200 DMA, it means the trend is downward. This vital support level matters for the trading strategy of high-frequency traders.

In addition to this, Citi’s propriety panic/euphoria indicator index has shifted into a neutral mode in August, after remaining in the panic zone till a couple of days back. Three factors are propelling the global equities markets at present.

One, record low global bond yields; second, the probability of an increase in interest rate by the US Federal Reserve has dropped to 42% leading to weakness in the US dollar; and lastly, a gush of money in passive instruments.

Vanguard, which manages nearly $3.6 trillion of the world’s largest investment companies, attracted a record $148 billion of new client money between January and June this year. Vanguard, which manages nearly $3.6 trillion of the world’s largest investment companies, attracted a record $148 billion of new client money between January and June this year.

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