US premium over global peers narrows to 1.32 amid massive sell-off

The US stock market has enjoyed a premium over the rest of the  world through most of 2018. However, the world’s biggest market is losing that margin quickly amid a sell-off that saw the Nasdaq Composite Index close in a bear market last week, and the S&P 500 Index on the cusp of one.

 

Currently, the premium between the MSCI USA index and the MSCI World (excluding USA) index has narrowed to 1.32, the lowest since June. At the start of the month, the premium had hit a record high of 1.46.

 

The S&P500 index had plunged 15 per cent in December. The index is set to post its biggest monthly setback since the 2008 Global Financial Crisis. The fall in the US market has induced in global equities. However, the fall in the rest of the world is relatively less. The MSCI World (ex-USA) is down 7.5 per cent this month.

 

So what to expect in the final trading days of 2018?

 

“As we’re seeing risk-off escalating, I would expect the U.S. to be more susceptible to an unwind relative to the rest of the world,” said Bloomberg Intelligence equity strategist Peter Chung.            

 

(with bureau inputs)