Q3 Earnings Alert! Plan early for this week’s stock reports with all key data in 1 placeSee list

Mideast Stocks Are Outlier As World Regional Equity Markets Sink

Published 11/21/2018, 08:08 AM
Updated 07/09/2023, 06:31 AM
SPY
-
VT
-
AFK
-
GULF
-

The widespread selling in equity markets around the world has left most regions in the red for year-to-date performance, based on a set of exchange-traded funds as of yesterday’s close (Nov. 20). The conspicuous exception: stocks in the Middle East. The US market, which has fallen sharply in recent weeks, is holding on to a fractional gain for 2018, but the razor-thin increase is no match for the still-solid increase so far this year for markets in the Middle East

WisdomTree Middle East Dividend (NASDAQ:GULF), which tracks a fundamentally weighted index of companies that pay dividends, is up 8.5% this year through yesterday’s close. The fund (the only regional Mideast equity ETF) has declined in recent trading sessions, but the setback has been mild compared with the selling wave in the rest of the world’s regions.

It’s debatable if the relative strength in Mideast stocks will endure. “Weak sentiment is clear across the region,” notes Tariq Qaqish, managing director for asset management at Menacorp Financial Services in Dubai. “It’s accompanied by geopolitical issues, the recent developments in Saudi (with the killing of journalist Jamal Khashoggi) and the possible outcome from that incident,” he tells Reuters.

Technically, the US stock market is still above water for year-to-date results, based on the SPDR S&P 500 (NYSE:SPY). But after yesterday’s sharp selloff, which follows weeks of mostly down days, this widely traded ETF proxy for US equities is up a fractional 0.3% for 2018 through yesterday’s close.

In fact, most of the world’s equity markets are in negative territory for the year so far, based on Vanguard Total World Stock (NYSE:VT), which has shed 6.2% year to date.

The biggest loss so far in 2018 for regional equity funds: VanEck Vectors Africa (NYSE:AFK), which has lost 19.1%.

VanEck Vectors Africa ETF

The performance chart below reminds that the US market has endured an especially volatile year. After sliding sharply early on in 2018, SPY rebounded (green line), only to hit a wall in October that delivered another dramatic reversal of fortune.

World Regional Equity Markets: YTD Performaces Daily

Although many analysts have turned bearish in the wake of the downturn, Jason Draho, head of asset allocation, Americas, at UBS Global Wealth Management, favors a contrarian view. Writing in a note to client via Bloomberg, he explains: “We view the sell-off as overdone and a bull-market correction, with valuations that have become more compelling. We recently increased our overweight to global equities on the view that the markets are already pricing in growth and trade risks.”

But in the wake of so much selling, minds will differ on what comes next. By some accounts, the latest tumble in stock prices is a warning sign for the US economy. Although the hard data published to date still looks encouraging, the pace of growth appears to be slowing. Yesterday’s revised nowcast for fourth-quarter GDP via the Atlanta Fed’s GDPNow model, for instance, dipped to +2.5%. That’s still a respectable advance, although it marks the second straight downshift in growth following the stellar increase 4.2% increase in Q2.

The fear in some circles is that the softer macro trend will roll on into 2019.

“I think there are very clear signs that investors are beginning to worry about weaker growth in the coming year or so, and how that’s going to feed through to corporate earnings,” Michael Pearce, senior United States economist with Capital Economics, tells The New York Times.

Disclosure: Originally published at Saxo Bank TradingFloor.com.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.