Global stocks ending bumper year on a high

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Global stocks this year enjoyed their best annual performance since the post-crisis recovery, as accelerating economic growth across the world helped power several major markets to double digit gains. The FTSE All-World index advanced nearly 22 per cent during 2017, its biggest increase since 2009 and its fourth-best yearly performance since the benchmark started in 1993.

Despite a late US stock tumble on Friday afternoon dragging the global stock market gauge down in the last trading session of the year, the FTSE All-World rose 1.6 per cent in December and has now notched up 14 straight months of gains — the longest run on record.

The S&P 500 equity benchmark ended 2017 on a sour note, slipping 0.5 per cent on Friday, but has gained over 19 per cent in the past 12 months, its sixth best annual performance over the past two decades. When dividends are included, the flagship US stock index has posted positive returns every calendar month of 2017 — the first such streak in history.

Wall Street analysts are eyeing another good year for the US stock market, forecasting the first double-digit growth in earnings since 2011, according to data from Factset. That is expected to lift the S&P 500 by another 7 per cent in 2018, according to the mean forecast of strategists polled by Bloomberg.

“I think equities performed marvellously and I think that’s going to continue on in 2018,” said Mark Grant, chief strategist at Hilltop Securities. The biggest driver of the roaring stock market rally has been the accelerating growth in the US, Europe and Asia. Japan’s Nikkei 225 index rose by a fifth this year, while Hong Kong’s Hang Seng surged 36 per cent.

“Global growth continues to be robust and broad-based, driven by industrial activity and investment,” Willem Buiter, chief economist at Citi, wrote in his outlook for the coming year, lifting the bank’s forecast for the pace of global economic expansion to 3.4 per cent for 2018. The UK’s FTSE 100 has been a star performer in December, rising another 0.9 per cent on Friday to take its monthly climb to nearly 5 per cent and ending the year at a fresh record high.

In dollar terms, the UK index has gained over 17 per cent in 2017. The gains were propelled by a recovery in commodity prices, which lifted many of the natural resource giants listed in London. But Charlie Ripley, an investment strategist at Allianz Investment Management, said that investors were also becoming cautiously more optimistic on the risks surrounding Brexit.

“There was anticipation of a larger economic slowdown but that really has not materialised. Markets are reflecting that,” he said. Emerging markets enjoyed a ninth day of advances in the past 10 trading days on Friday, but the late afternoon tumble of US stocks pushed the FTSE All-World index to a 0.1 per cent loss for the last trading day of 2017.

Contrary to expectations at the start of the year, global bond markets have also enjoyed a bumper 2017. Many investors and analysts had expected that the combination of the election of President Donald Trump, tighter monetary policy and accelerating inflation would finally end a three-decade bull run for bonds. Instead, the Bloomberg Barclays Global Aggregate, a broad $50tn fixed-income benchmark, has returned over 7 per cent — its best performance in a decade.

“It’s been a stellar year for stocks and it’s been a stellar year for bonds too,” said Jim Sarni, managing principal at Payden & Rygel Investment Management. “Globally, the world is in a pretty good place.”

Financial Times