The MSCI World Index captures large and mid-cap stocks in 23 developed markets, with about 1,644 constituents covering about 85% of the free float-adjusted market capitalization in each country.
MSCI World has plunged 7.4% in nine sessions as investors dump stocks across all markets after the rapid spread of Covid-19 outside China spooks fears about growth and corporate earnings.
Goldman Sachs notes Thur that "US companies will generate no earnings growth in 2020. We have updated our earnings model to incorporate the likelihood that the virus becomes widespread. Our revised baseline EPS estimates are $165 in 2020 (previously $174) and $175 in 2021 (previously $183), representing 0% and 6% growth. Our reduced forecasts reflect the severe decline in Chinese economic activity in 1Q, lower end-demand for US exporters, supply chain disruption, a slowdown in US economic activity, and elevated uncertainty. Consensus forecasts imply EPS will climb 7% in 2020 and 11% in 2021."
And if earnings growth is stagnating in the US, it's likely the same everywhere else as supply and demand shocks from China are expected to depress global trade growth for the year, and lead to a reset in valuations for global stocks.
As for MSCI World, nearing key support of 2,237, or the 200-day moving average (DMA). It's at this time where headlines from governments or central banks need to come in or risk a more systematic unwind.
Weekly MSCI World suggests the selling has only begun.
The global selloff is confirming what former Morgan Stanley Asia chairman Stephen Roach warned last month about a massive imminent shock that would hit the global economy.