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5 Global Market Trends to Watch in 2018

What we found when we analyzed the global financial market this quarter

Chau Pham


Every quarter, Morningstar's quantitative research team reviews the most recent global market trends in finance and evaluates the performance of individual asset classes. Then, we share our findings in the Morningstar Markets Observer, a new publication that draws on quantitative analysts' careful research and market insights.

Here's some of what we found this quarter:

Favorable economic conditions enable most countries to achieve high returns  

Most countries analyzed enjoyed positive (some even double-digit) trailing one-year returns. Robust economic reports kept propelling U.S. and major European markets. Others, like Greece and Spain, continued to battle debt issues and political instability. Trade tensions between the U.S. and China could adversely affect both economies and their other trading partners going forward.

1-Year Trailing Returns of Morningstar Country Indexes

Source: Morningstar indexes, with forecasts from the European Commission and the International Monetary Fund. 


U.S. large and small stocks did well while bonds suffered

U.S. stocks, both large and small, were among the few asset classes who remained in positive-return territory for the first half of the year. Commodities stayed above water because of the energy sector. Most fixed-income categories suffered as interest rates rose. High-yield bonds, however, managed to post a slight gain, because they are less sensitive to changes in interest rates than investment-grade bonds.

U.S. High Yield Corporate Bond Index

Source: Morningstar indexes, Barclays U.S. High Yield Corporate Bond Index. 


Fastest-growing fund families: Schwab is still on top

For the fifth consecutive quarter, Schwab (SCHF) came first in our rankings for having the highest, trailing organic growth rate, followed by Edward Jones’ Bridge Builder funds (BBCPX). These results reinforce the recent departure from commission-based to and fee-based accounts. New to this quarter’s rankings are VanEck and MassMutual with their emerging markets bond fund and mid-cap growth equity fund, respectively.

Top 10 Fund Families of the 100 Largest

Source: Morningstar Direct


The U.S. has one of the highest yields in the developed world

Despite their comparable economy, the 10-year U.S. yield increased to 2.9% while German yield lagged at 0.11%. As you can see in the chart below, U.S., German, and U.K. rates have risen in the last year, while Italian and French rates have declined. Since the European Central Bank continues to implement quantitative easing, European rates are relatively lower than the U.S. rate, which has been raised several times since the Federal Reserve ended its quantitative easing program. 

10-Year Government Bond Yields

Source: Macrobond Financial. 


Despite first shots of trade war, the IMF world growth rate remains strong

The International Monetary Fund world growth rate of 3.7% decreased by 0.1% from its previous forecast due to the unevenness of the expansion. Global growth forecasts for 2018 and 2019 remain strong, but rising oil prices and the escalating trade war risk clouding the sunny outlook. Growing retaliatory measures against the U.S.-imposed tariffs could undermine confidence among businesses and financial markets and disrupt the global supply chain, thereby hindering investment and productivity.

IMF World Economic Outlook Update

Source: International Monetary Fund. 

Download the full Markets Observer to read our latest findings on global market trends.

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