For investors around the world, 2015 is turning into a year to forget. Stocks, commodities and currency funds are all in the red, and even the measly gains in bonds are being wiped out by what little inflation there is in the global economy.
Rounding out its steepest quarterly descent in four years, the MSCI All Country World Index of shares is down 6.9 percent in 2015 including dividends. The Bloomberg Commodity Index has slumped 16 percent, while a Parker Global Strategies LLC index of currency funds dropped 1.8 percent. Fixed income has failed to offer much of a haven: Bank of America Corp.’s global debt index gained just 1 percent, less than the 2.5 percent increase in world consumer prices shown in an International Monetary Fund index.
After three years in a virtuous cycle of rising share prices and unprecedented monetary easing, markets are now sinking as emerging economies from China to Brazil weaken and corporate profits slump. Analysts have cut their global growth estimates for 2015 to 3 percent from 3.5 percent at the start of the year, and the turmoil has added pressure on central banks to prolong their stimulus programs, with traders scaling back forecasts for a Federal Reserve interest-rate increase by year- end.
“There was an element of people believing they had found some sort of holy grail to investing, then this breakdown occurs and it breaks down in a way that’s remarkable,” said Tobias Levkovich, Citigroup Inc.’s chief U.S. equity strategist. “What seemed to trigger this all was China. It sent us on a wave of downward fears.”
Investors suffered the brunt of this year’s losses in the third quarter.
MSCI’s global equity index sank about 10 percent in the period, while the Bloomberg commodity index lost 14 percent in its biggest slump since the global financial crisis seven years ago. The average level of Bank of America’s Market Risk index, a measure of price swings in equities, rates, currencies and raw materials, was the most this quarter since the end of 2011. The Chicago Board Options Exchange Volatility Index, a gauge of turbulence known as the VIX, reached the highest since 2011 in August.
China has been the biggest source of anxiety for investors, after turmoil in the nation’s financial markets fueled concern that the country’s worst economic slowdown since 1990 was deepening. The Shanghai Composite Index fell 29 percent in the third quarter, the most worldwide, and the yuan weakened 2.4 percent after authorities devalued the currency in August.
That sent a shudder around the world.
The worst quarter in seven years for the Bloomberg JP Morgan Asia Dollar Index, which tracks the region’s 10 most- active currencies outside of Japan, has pushed it down 5.1 percent this year to the lowest levels since 2009. A similar measure for Latin American currencies tumbled to a record.