Global Market Update: Taking Stock After Brexit


August 10, 2016


At William Blair, we hold a global market outlook discussion at the end of each year. This year, we planned to do a mid-year review as well, not knowing that significant events—notably, Brexit—would make the discussion more interesting. In this piece, portfolio managers Simon Fennell, who manages our international equity portfolios, and Casey Preyss, who manages our emerging market equity portfolios, discuss how we got where we are in 2016 and what we can expect for the remainder of the year. Included in this piece:

Year-to-Date Market Performance

  • Fixed-income and emerging markets have performed well.
  • Strong returns in Latin America, EMEA, and Canada contrasted with weak results in 2015, while the opposite has been observed in Japan.
  • Energy, materials, and utilities have led thus far in 2016, while they were the weakest-performing sectors in 2015.
  • In terms of style perspective, valuation led until April after lagging in 2015, then reversed course in May and June.

Key Themes of 2016

  • The first half of 2016 was dominated by three key themes: a decline in bond yields, abatement in the strength of the U.S. dollar, and an increase in political uncertainty.

Macro and Micro Outlook

  • From macroeconomic and microeconomic points of view, the outlook is relatively encouraging. Purchasing managers’ indices are at healthy levels broadly, with some differentiation across regions.

State of the Emerging Markets

  • We believe emerging market underperformance relative to developed markets has run its course.
  • A variety of factors are contributing to a more positive outlook for emerging market equities: valuation, flows, and the U.S. dollar are supportive; corporate fundamentals are improving; rebalancing is underway in China; and India continues to stand out.
  • In terms of Brexit’s implications for emerging markets, overall exposure to the United Kingdom, measured through exports as a percentage of gross domestic product is limited.

What to Watch for 2016

  • Corporate earnings have come back into focus.
  • Equity valuations are generally high globally, but emerging markets are a better value, in our view.
  • Technology remains a key overweight from a global sector perspective.
  • Central bank influence remains important.
  • Disruption themes remain relevant.


Read the Global Market Update Paper


This material is provided for information purposes only and is not intended as investment advice nor is it a recommendation to buy or sell any particular security.  Any discussion of particular topics is not meant to be comprehensive and may be subject to change.  Data shown does not represent the performance or characteristics of any William Blair product or strategy.  Any investment or strategy mentioned herein may not be suitable for every investor.  Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Past performance is not indicative of future results.  Information and opinions expressed are those of the author and may not reflect the opinions of other investment teams within William Blair. Information is current as of the date appearing in this material only and subject to change without notice.