Stocks rose for a fourth consecutive month in December, extending indices’ record-breaking rally this year, as the US and China struck an initial trade deal and reports pointed to an acceleration in the global economy.
The STOXX® Global 1800 Index climbed 3% to a record in dollar terms1, taking its gain for 2019 to 28.4%, the index’s best annual return since 2009.
The STOXX® North America 600 Index led the advance among three major regions, adding 2.9%. The STOXX® Asia/Pacific 600 Index increased 2.2%. The pan-European STOXX® Europe 600 Index climbed 2.1% when measured in euros. Excluding dividend payments, the benchmark broke a previous record high from 2015.
The Eurozone’s EURO STOXX 50® Index increased 1.2% in the month for a 29% advance in 2019, its best year since total-return data starts in 2001. Excluding dividends, the index posted its best year since 1999, but remains more than 30% below its 2000 all-time high.
Positive sentiment builds up
Details of a trade deal emerged on Dec. 13 under which China pledged to buy more American products and the US pulled back planned import tariffs on the Asian country. During the month, better-than-expected data on US job creation and Chinese industrial production bolstered investor optimism.
All developed markets tracked by STOXX advanced during the month when measured in dollars, led by an 8.3% gain in the STOXX® Norway Total Market Index. The STOXX® Developed Markets 2400 Index rose 3% in dollars and 1.1% in euro terms, as the common currency strengthened 1.8% against the greenback.
December’s rally also lifted all 19 supersectors in the STOXX Global 1800 Index. The STOXX® Global 1800 Basic Resources Index led returns with a 6.4% advance. The STOXX® Global 1800 Media Index was the month’s worst performer, rising just 0.4%.
Minimum variance lags
Amid the broader rally, minimum variance strategies continued to struggle relative to their market-capitalization-weighted benchmarks.
The STOXX® Global 1800 Minimum Variance Index returned 1.9%, 1.1 percentage points less than its benchmark. The STOXX® Global 1800 Minimum Variance Unconstrained Index rose 2.4%, underperforming the benchmark by 0.7 percentage points. For the entire year, the two minimum-variance indices underperformed, respectively, by 5.7 and 7.2 percentage points.
Some dividend strategies reverted their recent underperformance during December. The STOXX® Global Maximum Dividend 40 Index, which selects the highest-dividend-yielding stocks, rose 3.5% in dollars on a net-return basis. The STOXX® Global Select Dividend 100 Index, which tracks companies with sizeable dividends but also applies a quality filter such as a history of stable payments, gained 3.6% on a gross-return basis.
Factor-based strategies struggle again
The iSTOXX® Europe Factor Market Neutral Indices, which hold a short position in futures on the STOXX Europe 600 to help investors neutralize systematic risk, extended the year’s negative streak during December.
Five of the seven indices posted a loss in the month on a net-return basis, with the iSTOXX® Europe Multi-Factor Market Neutral Index showing the worst performance at a 1.1% loss. The index offers exposure to six sources of risk premia by selecting those companies that score well along the entire set of factors.
The average loss in 2019 for the seven indices — which target the size, carry, quality, momentum, value and low-risk factors, was 4.9%.
Thematics close strong year
Thirteen of 17 STOXX revenue-based STOXX® Thematic Indices, which look at companies’ sales exposure to sectors closely related to specific trends, beat the STOXX Global 1800 Index during December when measured in dollars.
For the whole of 2019, ten of them topped the benchmark’s returns. All indices posted double-digit growth rates in the year that ended, led by a 48.3% advance in the iSTOXX® Global Artificial Intelligence Index.
STOXX’s artificial-intelligence-driven thematic indices, on the other hand, lagged their benchmark during December. The STOXX® AI Global Artificial Intelligence Index and its ADTV5 version, however, topped the STOXX Global 1800 Index for 2019 by more than 2 percentage points. The iSTOXX® Yewno Developed Markets Blockchain Index did so by more than 1 percentage point.
ESG, Low Carbon, Climate
STOXX’s ESG and Sustainability indices outperformed their benchmarks during December. The STOXX® Global ESG Impact Index, which selects stocks based on key sustainable performance indicators, beat the STOXX Global 1800 Index by 55 basis points.
STOXX® Global 1800 Index
EURO STOXX 50® Index
STOXX® Europe 600 Index
STOXX® North America 600 Index
STOXX® Asia/Pacific 600 Index
STOXX® USA 900 Index
STOXX® Japan 600 Index
STOXX® Developed Markets 2400 Index
STOXX® Emerging Markets 1500 Index
STOXX® Global 1800 Minimum Variance Index
STOXX® Global Select 100 EUR Index
iSTOXX® Europe Multi-Factor Market Neutral Index
STOXX® Global ESG Impact Index
STOXX® USA ESG Impact Index
1 All results are total returns before taxes.