Global equities stalled in the fourth quarter, pressured by concerns over a potential trade war and signs that interest rates may remain higher than previously expected. U.S. President-elect Donald Trump’s victory sent U.S. stocks higher but weighed on the markets of major trading partners, such as Europe and China, which could be hit by higher tariffs under the incoming administration.
Consumer discretionary stocks rallied, gaining nearly 9% in the MSCI World Index, boosted by strong rallies in the shares of consumer-tech giants Amazon and Tesla. Materials stocks posted the largest declines, losing 14% in aggregate as China’s slowing economy hurt global demand. Health care and real estate stocks also lost significant ground.
Most bond markets declined as inflation remained above target and the U.S. Federal Reserve (Fed) signaled that it wouldn’t cut interest rates as aggressively as previously expected. Both the Fed and the European Central Bank lowered policy rates during the quarter as market rates generally moved higher.