The best and worst performing global stock markets in 2019

The best performers in 2019 have been Russia, Greece and Dubai-Kuwait, with Brazil, Italy and America next in line. The US represents almost two-thirds of global market capitalisation so a 27.4% gain from its stock market, as benchmarked by the S&P 500 index, helped the FTSE All-World to rise by more than a fifth during the course of the year.

It is nevertheless unlikely that investors would have even vaguely considered any of the top five, dismissing as them as just too dangerous, too politically unstable, too reliant on commodities, too weak economically or a combination of all four.

But this just goes to show that buying what is comfortable is rarely the route to big profits.

Stock market performance in 2019*

Source: Refinitiv data. *Capital gains in local currencies, from 31 Dec 2018 to 17 Dec 2019

Top performers

Russia emerged from a recession, helped by interest rate cuts and the carefully crafted policies of its respected central bank head, Elvira Nabiullina, as well as some positive movements on the corporate governance front, notably Gazprom’s decision to hugely increase dividend payments and the lifting of international sanctions against some companies, including Rusal. The RTS index had also begun the year looking cheap on an earnings and a yield basis, as investors shunned it for reasons of oil price weakness, geopolitics and questions of over economic and corporate profits growth.

Expectations were also very low for Greece at the start of the year, as the country tried to fight its way out of an economic depression that has lasted for much of the decade.

The Athex index’ performance may owe something to the old adage that ‘what goes down, must come back up’ – the 25-stock index still trades a more than a third below its 2014 high and some 90% below its 1999 peak.

But it also owes a lot to Prime Minister Alexis Tsipras and his radical left-wing Syriza party losing July’s snap general election to Kyriakos Mitsotakis and the centre-right New Democracy. The new PM and his newly-appointed Finance Minister, Christos Staikouras, wasted no time in promising reforms and tax cuts. They also ended four years of capital controls and, in October, oversaw Greece’s first issue of ten-year Government bonds in nine years. From a top-down perspective, rightly or wrongly, few things attract capital more readily than a switch to a right-wing, pro-business government from a left-wing one. The Mitostakis-Staikouras team now has to keep the momentum going after a promising start.

Brazil also benefited from a political shift from left to right as President Jair Bolsanaro sought to implement widespread economic and social reforms following his general election win in October 2018.

The presence of a number of European markets in the top ten list may also surprise, but again this shows how contrarian positions can pay off. Many investors have given up on Western Europe, citing concerns over Brexit, trade wars, weak coalition governments, mounting debts and the apparent inability of the European Central Bank to conjure the growth and inflation that it craves.

But more interest rate cuts and QE from the ECB looks to be granting Italy yet another reprieve while Germany’s export-driven economy is making the most of record-low interest rates and a competitive currency.

Hopes for pro-growth reform also fuelled French equities, alongside hopes for central bank support and a settlement to global trade disputes.

These markets have now climbed the wall of worry. If trade talks disappoint and global economic and corporate profit momentum ebb, they could still slide down the slope of hope, so investors must not be complacent, especially as France looks to be moving to the next stage of the battle for supremacy between President Macro and those who oppose his policies.

Worst performers

If the performance data were to be given in sterling or dollar terms, Turkey and especially Argentina would feature, thanks to weakness in the lira and a collapse in the peso, so portfolio builders must always be aware of the importance of currency movements when investing overseas.

Political uncertainty hung over many of the laggards, including Spain, Hong Kong and Chile, while weak oil and natural gas prices did little to help the UAE or Qatar. The latter’s economy is also still being hampered by 2017’s decision by Saudi Arabia, Egypt, Bahrain and the Gulf states of the United Arab Emirates to break off diplomatic relations and impose an economic blockade. Qatar’s withdrawal from OPEC in January 2019 suggests a rapid thaw in relations looks unlikely for now, although any rapprochement could therefore be a positive for the economy and Doha’s stock market.

South Africa just managed to dodge a second recession in two years, but the Johannesburg market was still held back by weak growth, soggy commodity prices and the failure by the ruling ANC party to come up with a convincing financial programme. A gathering financial crisis at state-owned power utility Eskom that led to widespread power cuts did not help, either.

The macroeconomic background in South Africa therefore looked bad and matters looked just as bleak from a bottom-up perspective owing to a second major accounting scandal in three years. Shares in agricultural giant Tongaat Hulett were suspended in the summer, in an uncomfortable echo of the embarrassing share price collapse of the internationally acquisitive retailer Steinhoff in 2017.

Any investors intrepid enough to be considering exposure to the Johannesburg market in 2020 will therefore be looking for comfort from the old adage about the darkest hours coming just before the dawn.

These articles are for information purposes only and are not a personal recommendation or advice.