The investment joy that American indices registered after the presidential elections in the United States led to MSCI World, the selective one which brings together companies from the 23 most developed economies in the world, at record prices last Monday. The latest falls in the main stock markets here and elsewhere on the continent take the world stock market off its historic level (with a drop of around 1% over the last three days), but mark the largest annual difference with the MSCI Emerging Markets, an index that includes developing countries, with a gap that has widened to 12 points since January 1.
The latest declines in the US stock market – which also take the S&P 500 and the Nasdaq 100 off their all-time highs – come after comments from Jerome Powell, Chairman of the Fed, who stressed this week that “it there is no rush” to lower interest rates. Thus, over the year as a whole, the world stock market has recorded a return of just over 18% since January 1, compared to the increase of almost 6% of the benchmark index including emerging countries, much more penalized in recent years and losing almost 5% since last Friday. just over 15 points in favor of the MSCI Emerging Markets, with an increase of 25.7% from current levels compared to 10% for the MSCI World.
Even though his year was already optimistic, the last rally The experience of American references (having great weight on the global stock market) arises in the heat of the victory of Donald Trump, who proclaimed himself President of the United States on November 5. It was in fact at that moment that the S&P 500 crossed the psychological barrier of 6,000 points and the Dow Jones reached historic highs of 44,263 points.
Concerning the performance of the emerging stock market, Chinese indicators have a significant weight within the emerging countries index. This week, the Hang Seng, Hong Kong’s main index, and the CSI 300, Shanghai’s stock market, closed down 6.3% and 3.3% respectively. The Japanese Nikkei, for its part, does not escape the red claws and gives 2.2% per week.
Uncertainty bathes emerging markets since, according to Antonio Castelo, analyst at iBroker, Trump’s second term could pose challenges for MSCI Emerging Markets countriesthrough pressures on their currencies, limitations on their central banks and possible destabilization of their trade relations. “Trump’s policies, as well as the perception that the Federal Reserve will tend to adjust the process of lowering interest rates both to the evolution of the North American economy and to the evolution of inflation, have strengthened the dollar This reduces the room for maneuver of the United States central banks of emerging countries and could cause a depreciation of their currencies. For many emerging markets, a stronger dollar means greater difficulty repaying debts. denominated in dollars and less access to international financing,” he explains.
Concerning the duration of the euphoria in the American markets, the iBroker analyst believes that, despite the fact that the North American stock indices remain close to their highs, “the perception we have is that the euphoria of the markets after Trump’s election eased slightly. , and investors appear to be waiting for more signals from the Federal Reserve and concrete economic data before taking significant action. »
James Cook, head of emerging markets specialist investments at Federated Hermes, believes that Trump’s victory “won’t change the structural drivers of emerging market growth.” “Donald Trump’s resounding victory in the US elections has many possible consequences for emerging markets. The policies announced by Trump could also have unintended consequences for the U.S. economy.. Raising tariffs could increase the price U.S. consumers pay for goods; and any increase in the already bloated budget deficit could send bond yields soaring, keeping rates higher for longer and U.S. companies paying more for their loans, while the strength of the U.S. dollar reduces the appeal of U.S. products.” , he explains.
Regarding the effects in China after Trump’s victory, Sandy Pei, Senior Portfolio Manager of the Asia ex Japan fund, recalls that “Not the first time U.S. tariffs have been a potential problem and this time, Chinese companies are better prepared. We have seen many diversify their production base, establishing factories in Southeast Asia, Mexico and Eastern Europe.” For his part, Julius Baër highlighted the “significant negative impact” they saw on the Chinese economy after the victory of the Republican candidate. However, they qualify their opinion by explaining that “this will probably be partially offset by additional budgetary support for the national economy”.
Distance from annual highs
The main European benchmarks have also not digested the arrival of the new president at the White House well, with the Ibex 35 recording its biggest drop in a single session in a year and eight months. However, in recent days the Spanish index has once again been the one that has shown the greatest strength, and on Friday it was the only positive among the main indices of the old continent. Compared to current levels, it is within 3% of its annual highs.
Thus, after the latest corrections, the annual maximums are moving away from the European markets, with a distance of more than 11% in the case of the French CAC, which is the only negative index of the year. The EuroStoxx is currently almost 6% from its annual peak.
The Japanese Nikkei is one of those with the furthest distance from returning to the maximum price levels of the year, having suffered a collapse of up to 14% in August, after US macroeconomic data have worried the market about a possible recession. in the world’s largest economy. The one furthest from this chart is the Hang Seng, almost 16% off its year highs.
