Financial Markets 2018: the year in review

Jaysen · Dec 31, 2018

Stock markets have suffered this year as interest rates start to rise. Until now, stocks have done very well from the low interest rate environment as companies have been able to borrow money cheaply and benefit from rising demand. Global stocks are on course for their worst quarterly performance in seven years. Interestingly, the best performing stock market was the FTSE 100, although that was still down 10.6%
Utilities and health care are the two best performing sectors. These are known as defensive sectors. The worst performing sectors include basic resources and materials, which are used in construction, banks, and autos. These are known as cyclical sectors (demand is dependent on the health of the economy).
US government bond yields are rising thanks to strong growth, wage inflation and rising interest rates. Meanwhile in Europe, Italian 10-year bond yields rose when the government clashed with the EU over its budget (the rising bond yields reflected the increased risk investors perceived when buying government bonds, causing them to demand higher interest rates).
The US dollar has continued to rise, which have hurt foreign borrowers with a lot of dollar-denominated debt.

Finally, here is Schroders' Global economic outlook for December 2018: