Sandrine Soubeyran
Sayad Reteos Baronyan, PhD,
Global equity markets have risen many folds since the global financial crisis (GFC) in 2008-2009 and the Covid shock in 2020. As Chart 1 shows, the FTSE All World, which represents medium and large companies from 49 countries in the developed (FTSE Developed) and emerging markets (FTSE Emerging), has gained 216% in returns between December 24, 2007 and August 30, 2024, representing an equivalent annualised return of 7.7% in US dollar terms.
- The analysis of the global equity market over the last 16 years shows the profound legacy of the global financial crisis, with its effects still in evidence today.
- On many measures, the US has been the most resilient equity market and a success story, with its equity outperformance and strong rally increasing its concentration in global equity markets.
- The FTSE USA has returned 11.1% (annualised) since GFC and strong performance also came from the FTSE Developed (243%, or 8.2% on an annual basis), which has a high exposure to US equities of 69%.
This regional performance also highlights the strength of the US equity market (dark grey line), with the FTSE USA returning 426%, or an annualised returns equivalent of 11.1%. Strong performance also came from the FTSE Developed (243%, or 8.2% on an annual basis), which has a high exposure to US equities of 69%.
However, although positive, emerging markets have registered the weakest returns (52%, or an annual return equivalent of 3.3%). Returns in Europe (ex UK) were up by nearly 101%, and 66% in the UK (annualised equivalents of 4.9% and 3.7% respectively) in US dollar terms, were also comparatively modest, and about half or less of the annualised returns of the FTSE USA and the FTSE Developed.
Chart 1. US equities have led the FTSE All World performance since GFC
Source: FTSE Russell, LSEG as at August 31, 2024. Cumulative, monthly total returns in US dollar terms. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
As a result of the strong market performance, the US equity weight has significantly increased over the last 16 years. From 41% in 2008, the US represents more than three fifth of the market weight in the FTSE All World today. The Chinese size has also grown overall, with a current weight of just under 3% in 2024 (from 1.5% in 2008), though to note that China’s weight has decreased since 2020 from a peak of 5%.
By contrast, France and Germany are smaller by about 2% since 2008 as shown in Chart 2, while the share of Japan and the UK has fallen by 3-4%, to about 6% and 4% respectively. Emerging markets (excluding China) have also reduced in weight, from 11% to 7%.
Chart 2. The size of the UK, Japan and EM (ex China) in the FTSE All World has fallen the most since 2008
Source: FTSE Russell, LSEG as at August 31, 2024. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
Unsurprisingly, the regional return contribution analysis of the FTSE All World between 2008-24 also highlights the dominance of the US equity market. Chart 3 shows that the US contributed 181%, out of a total return contribution of about 216% during, the 16-year period in US dollar terms. The next largest contribution came from Switzerland, though this single digit contributions pales compared to the US contribution. The contribution from Spain, Greece and Italy was negative, highlighting the impact of the Great Recession on the Eurozone economy.
Chart 3. The US contribution since GFC dwarfs the return contributions of other nations
Source: FTSE Russell, LSEG as at August 31, 2024. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
The analysis of the global equity market over the last 16 years shows the profound legacy of the global financial crisis, with its effects still in evidence today. The strengthening of the banking system and financial market regulations post GFC have served financial markets well, but the crisis also exposed the fragility of financial markets, especially in the EU, following the sovereign debt crisis, Greek debt default and the impact of the War in Ukraine. The aftermath of GFC also saw the UK economically weakened by its exit from the EU, which has weighed on its equity market in performance, size and valuation, and decreased its correlation with the FTSE All World today.
On many measures, the US has been the most resilient equity market and a success story, with its equity outperformance and strong rally increasing its concentration in global equity markets.
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