As of September 30, 2013
At the beginning of the third quarter, global stock markets experienced a period of recovery before moving towards profit taking in August as the situation in Syria and discussions of a reduction in quantitative easing1-related bond purchases by the U.S. Federal Reserve (the Fed) indicated further near-term risk. The Fed’s decision in September not to reduce it $85 millionper-month bond buying program and improved macro-economic data from China and Europe prompted markets to rally in the final month of the quarter. Although the re-emergence of the U.S. debt-ceiling2 discussion negatively impacted stock returns in the final days of the quarter, the strength of the rally saw markets record the fourth strongest September performance since inception of the MSCI All Country World Index (ACWI)3 in 1988. From a global perspective, the U.S. underperformed the ACWI as Japan and Europe led the returns. The Asia Pacific ex-Japan region and Emerging Markets were buoyed by the positive macro data from China and a reversal of stock sell-offs in India and Indonesia.
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1Quantitative easing is monetary policy used by central banks to stimulate a national economy. Typically, central banks implement quantitative easing by buying financial assets from commercial banks and other private institutions, injecting a pre-determined quantity of money into the economy.
2Debt ceiling is the maximum amount of monies the United States can borrow. The debt ceiling was created under the Second Liberty Bond Act of 1917, putting a “ceiling” on the amount of bonds the United States can issue.
3The MSCI All Country World Index captures large, mid and small cap representation across 24 developed markets countries which include Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the U.K. and the U.S. and 21 emerging markets countries which include Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey. With 5,984 constituents, the index covers approximately 99% of the global equity opportunity set outside the U.S.