Global Equities Still Well Above COVID Lows

June 30, 2022 | David Hernandez, CFA, Director of Traditional Manager Search

Three-line chart showing cumulative performance of global equity indexes in recent years. Chart subtitle: Despite the year-to-date correction, equity markets remain well above early 2020 lows. Chart visual description: Y-axis is labeled Cumulative Return and ranges from -40% to +60%. X-axis shows months from December 2019 to June 2022, in two-month increments. MSCI EAFE line is green, MSCI EM is dark green, and S&P 500 line is orange. Chart data description: Cumulative return treats 12/31/19 as 0. In early 2020, markets slumped and ultimately dropped signifanctly to trough at over -30% each. Throughout 2021, global equities recovered strongly. However, the first half of 2022 has been challenging amidst ongoing geopolitical and macroeconomic concerns. As of June 29, 2022, all three indices are down 17% to 19% year-to-date, though the S&P 500 is still up roughly 77% from its March 2020 low and the non-U.S. indices are both up over 40%. Chart source: Bloomberg as of June 29, 2022. End chart description.

Just over two years ago, on March 23rd, 2020, global equities hit their COVID-19-induced bottom. At their lows, the S&P 500, MSCI Emerging Markets Index, and MSCI EAFE Index were down 30%, 32%, and 33%, respectively, year-to-date. Over the next seven quarters, global equities produced mostly positive returns, with the S&P 500 leading the way. From the 2020 trough, the large-cap U.S. index was up an astounding 119% through the end of 2021.

This year, markets have faced several geopolitical and macroeconomic concerns that have squashed that positive momentum. Russia’s invasion of Ukraine in February and China’s rise in COVID-19 cases combined with its zero-COVID policy have worsened supply chain issues, exacerbated global inflation, and added to mounting economic pressures. To combat inflation, central banks have aggressively raised interest rates, which will likely further dampen economic activity. As a result of these headwinds, the S&P 500, MSCI EM, and MSCI EAFE benchmarks are all down roughly 17–19% year-to-date.¹ Despite these losses, global equities remain well above the COVID-19 trough, with non-U.S. equities still roughly 40+% higher and the S&P 500 77% higher. Looking forward, we expect global equities — particularly in developed countries — to face continued volatility in the second half of the year as central banks continue their fight against inflation, likely at the expense of economic growth.

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¹As of June 29, 2022