Kevin Barr, Head of SEI's Investment Management Unit, takes a look at the global financial markets in 2019.
Fourth Quarter Review
I'm Kevin Barr, Head of SEI's Investment Management Unit. Over the next few minutes I will provide an overview of the global financial markets and our perspective on them.
Equity and fixed-income markets around the globe delivered above-average performance in 2019.
U.S. stocks led for the fourth quarter and the full year, as measured by the S&P 500 Index, maintaining the dominance that they showed for the full decade. Globally, stocks performed well during the fourth quarter, as measured by the MSCI ACWI Index, but trailed the U.S.
Emerging-market equities played catch-up, ranking as the fourth-quarter’s best performer, but trailed the developed world for the year and decade as a whole.
Breaking global stock-market returns down to the country level, we can see that the historically strong performance during the fourth quarter and full-year 2019 was broad based. A large majority of countries participated in the gains, and only a handful had losses.
Looking at fixed income, U.S. Treasury rates declined across all maturities over the full year. Government-bond rates generally followed suit around the rest of the developed world.
During the fourth quarter, however, short-term U.S. rates fell while long-term rates rose, resulting in a steeper yield curve.
This reversal in the direction of long-term rates came after the 30-year Treasury rate fell to its lowest-ever level during the third quarter. Since bond yields and prices move in opposite directions, falling rates over the course of 2019 helped propel many areas of the bond market to positive performance.
Moreover, the combination of falling rates and a healthy risk appetite among investors meant that the riskiest segments of the fixed-income universe — high-yield bonds and emerging-market debt — led the way. U.S. investment-grade corporates were also notable performers in 2019.
- Bloomberg Barclays Global Treasury Bond Index: The Bloomberg Barclays Global Treasury Bond Index is composed of those securities included in the Bloomberg Barclays Global Aggregate Bond Index that are Treasury securities.
- Bloomberg Barclays U.S. Corporate Bond Index: The Bloomberg Barclays U.S. Corporate Investment Grade Index is a broad-based benchmark that measures the investment-grade, fixed-rate, taxable corporate bond market.
- Bloomberg Barclays U.S. Treasury Index: The Bloomberg Barclays U.S. Treasury Index is an unmanaged index composed of U.S. Treasurys.
- ICE BofA U.S. High Yield Constrained Index: The ICE BofA U.S. High Yield Constrained Index tracks the performance of below-investment-grade, U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market and caps exposure to individual issuers at 2%.
- JPMorgan EMBI Global Diversified Index: The JPMorgan EMBI Global Diversified Index tracks the performance of external debt instruments (including U.S. dollar-denominated and other external-currency-denominated Brady bonds, loans, eurobonds and local-market instruments) in the emerging markets.
- JPMorgan GBI-EM Global Diversified Index: The JPMorgan GBI-EM Global Diversified Index tracks the performance of debt instruments issued in domestic currencies by emerging-market governments.
- MSCI ACWI Index: The MSCI ACWI Index is a market capitalization weighted index composed of over 2,800 companies, and is representative of the market structure of 49 developed and emerging market countries in North and South America, Europe, Africa, and the Pacific Rim. The index is calculated with net dividends reinvested in U.S. dollars.
There are risks involved with investing, including loss of principal. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Diversification may not protect against market loss.
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice and is intended for educational purposes only.
Index returns are for illustrative purposes only and do not represent actual investment performance. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.
Information provided by SEI Investments Management Corporation, a wholly owned subsidiary of SEI Investments Company (SEI).