Market Review – July 2009

So much for sell in May & go away……

July was a very strong month for global equity markets, with the MSCI World Index up over 7% in Euro terms. Year to date, the Index is now up 13.6%.

Investor sentiment remained positive despite the slight pull back in stock prices in late Qtr 2. Emerging markets performed best, gaining over 10% in July. Emerging markets in total are now up close to 50% since the beginning of 2009 and that’s despite the very large falls experienced in the first 2 months of the year.

Performance through July can be characterised as consistent – equities outperformed bonds, and within equities, emerging markets outperformed developed markets, small cap outperformed large cap, and value stocks outperformed growth stocks. In addition, cyclical stocks outperformed defensives, and commodities rallied strongly. The only inconsistency to note was the weakness in crude oil (and energy equities).

During the month, economic data releases from the US were better than had been expected. US housing data surprised positively as housing starts and new home sales came in well above expectations. However, US consumer data was again weak and may well be the key headwind to a sustained strong recovery in the long term.

Quality dividend paying stocks outperformed slightly in July. The focus of investors over recent months has been on ‘bargain basement priced’ low quality stocks but emphasis switched to stocks with strong foundations during the month. Eco themed equities also gained during the month with water, alternative energy and climate change companies continuing their strong recovery since March.

Markets Year to Date (to 31st July) Euro Return
Ireland +21.2%
UK +21.4%
USA +8.80%
Nasdaq +29.7%
Europe +13.7%
Japan +5.0%
Pacific Basin +21.6%
World +13.6%
Bonds +2.9%

Source – KBC Asset Management & Irish Life Investment Managers

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