MSCI’s flagship global equities index, the All-Country World, reached an all-time high level last week, as global stocks continues to rally.
The index closed at 866.402 on Wednesday, marking the highest point in its 23-year history and the third straight day of record-breaking levels, MSCI revealed.
The MSCI ACWI index is the provider’s flagship product, covering global equities, including emerging and developed countries, and consisting of 2,484 large and mid-cap stocks; this is around 85% of the entire investable equity market.
The surge reflects investor optimism about global stocks, fuelled by their expectations of a positive impact coming from US President Donald Trump’s pro-business policies, such as tax cuts, according to Raman Aylur Subramanian, MSCI’s head of equity applied research.
This optimism has been evident from most global markets at the start of 2017, in a stark reversal from the previous year, which started with huge market falls on the back of concerns about China. However, this year many investors are concerned these gains could be unsustainable, and some are saying the US stock market is overvalued.
Meanwhile, MSCI said the small-cap segment of the market has been outperforming large- and mid-cap stocks. The ACWI IMI index, which includes small caps, was up by nearly 6% over the year to 22 February.
MSCI’s Subramanian said a large part of these gains were down to institutional investors putting money into small-cap equities, as they take an ‘all-cap’ approach to their portfolios.
US equity investors, in particular, are leaning towards smaller companies since these are more domestic-facing, and are therefore likely to benefit more from President Trump’s protectionist policies than larger firms, which could be hit by some of his proposals aimed at making it harder for US firms to employ workers abroad.
Investor bullishness is also reflected in investment flows, with asset-gathering strong for equity ETFs in January, according to iShares (see previous article). However, it was regional US and European equities that saw the strongest inflows.
Out of the ETFs tracking the MSCI ACWI index rated by TrackInsight, the best rating (five stars) has been awarded to the Lyxor UCITS ETF MSCI All Country World ETF, denominated in euros. The product has a total expense ratio (TER) of 0.45%, a tracking difference of -0.2044% and a tracking error of 0.0247%; its AUM is €146m.