The MSCI World index sets a new all-time record!The MSCI World stock market index set a new all-time record during the trading session of Monday June 2, wiping out the entire stock market shock of February/March, which saw the global equity market lose 20%. This technical signal still needs to be confirmed at the end of the week at the next weekly technical close. If this bullish technical break were to be confirmed, then this would be a very positive signal for the global equity market, which is still hoping that trade diplomacy will lead to solid trade agreements between the USA and its main trading partners (China and the EU).
The chart below shows the weekly Japanese candlesticks of the MSCI World index.
1) Composition and calculation of the MSCI World index
The MSCI World Index (Morgan Stanley Capital International World Index) is a benchmark stock market index that measures the performance of large- and mid-cap equities in developed countries. Here are the main elements of its composition:
The MSCI World Index is a benchmark global stock market index that measures the performance of large- and mid-cap equities in 23 developed countries. Created by Morgan Stanley Capital International, it offers a global view of the equity markets in the most advanced economies. Among the countries included are the United States, Japan, the United Kingdom, France, Germany, Canada and Australia. The index comprises some 1,600 companies, with a strong dominance of the USA, which accounts for almost 70% of its total weighting. The most represented sectors are information technology, healthcare, financial services and consumer discretionary.
The MSCI World is calculated using a weighting method based on free-float market capitalization, i.e. taking into account only those stocks actually available for purchase on the markets. This means that companies with a higher market value and a larger free float have a greater influence on the index's performance. The MSCI World is updated regularly to reflect market developments and the entry or exit of companies.
Although it offers broad geographic diversification, it does not include emerging countries; these are covered by the MSCI ACWI index, which is also close to setting a new all-time record and is 13% composed of emerging countries (China, India, etc.).
2) Trade diplomacy and the FED's monetary policy outlook are key to keeping the global equity market bullish in the months ahead.
Trade diplomacy and the FED's monetary policy outlook are closely linked fundamental factors which have a direct impact on global equity market trends.
While the US inflation rate continues to trend towards the FED's 2% target, the FED is waiting for trade agreements to be signed to ensure that the risk of a second wave of inflation is averted, so that it can resume cutting the US federal funds rate.
These two fundamental conditions are essential if the global equity market is to confirm its new record highs over the coming months.
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