The stock sell-off in the Dow Jones Industrial Average continued Thursday after yesterday’s 800-point thrashing with more bouts of volatility in the red, but compared to the rest of the world from a year-to-date perspective, the U.S markets are the only ones in the green, according to data from Yardeni Research, Inc.
When juxtaposed with all countries, emerging markets, Economic and Monetary Union (EMU), Japan, and United Kingdom, the U.S. sits atop the rest with respect to the aggregate of its MSCI share price indexes.
Related: Emerging Markets: When the Time is Right, Will you be Ready?
Much of the pain felt in the rest of the world, particularly in emerging markets, has been due to trade wars between the United States and China, but the U.S. has largely been able to parry its effects thus far this year. However, that could change, according to forecasts from the International Monetary Fund.
For the first time in two years, the International Monetary Fund expressed skepticism for global growth in the coming years as the organization cut its forecast for economic growth in 2018 and 2019, citing escalating trade wars as the prime disruptor.
“There are clouds on the horizon. Growth has proven to be less balanced than we had hoped,” said IMF Chief Economist Maurice Obstfeld. “Not only have some downside risks we identified in the last WEO been realized, the likelihood of further negative shocks to our growth forecast has risen.”
According to the IMF, both the United States and China would feel the implications of the tit-for-tat tariff war between the two economic superpowers starting next year. Furthermore, rising interest rates will also divert investment capital from emerging markets, causing further pain abroad.
The IMF is currently conducting its annual meetings in Bali, Indonesia, which will likely include discussions regarding trade wars and the Federal Reserve’s tightening monetary policy. The IMF’s global growth outlook comes as U.S. equities have been feeling downward pressure as of late with rising Treasury yields dominating the financial news.
Rest assured, yesterday’s 800-point loss in the Dow will also be a likely topic of discussion.
“This major sell-off would not have taken most investors by total surprise,” said Nigel Green, CEO and founder of deVere Group. “With rising interest rates, a contracting labor market and rising oil prices, this readjustment was all to be, to some degree, only a matter of time. Other triggers included the rising bond prices, escalating trade tensions between the world’s two biggest economies and concerns about valuations as we head in to earnings season.”
Even with the latest Yardeni Research data showing the U.S. as head and shoulders above the rest of the world, Green recommends that investors still diversify across the globe, especially if the sell-off continues and other parts of the globe slowly get back into positive market territory.
“This latest sharp global sell-off should serve as a timely reminder for investors to ensure that their portfolios are properly diversified across assets, sectors and geographical regions,” said Green.
For more market trends, visit ETFTrends.com