There are for Asian investors who incorporate U.S. equities to alleviate their tendency for a home country bias. Representing nearly 60% of the global equity market, as measured by the , U.S. equities provide a larger opportunity set outside of Asia, along with potential diversification due to different economic structures and cycles between markets, coupled with differing sector exposures. The , widely regarded as the best single benchmark of large-cap U.S. equities, has an estimated USD 5.7 trillion in assets tracking1 the index and a . Market participants can consider using S&P 500 index-linked products to efficiently trade U.S. equities.2023 demonstrates the impact of U.S. equity exposure for Asian investors. A slower-than-expected economic recovery in China with a continued property market downturn and ongoing U.S.-China tensions weighed on market sentiment and performance, making China and Hong Kong among the relative underperformers with their S&P BMI country indices losing 10% and 15%, respectively (see Exhibit 1). However, equity markets remained resilient in other parts of the world that had stronger economic backdrops. Easing inflation and the potential for lower interest rates led to a sharp market rally in the fourth quarter, with the S&P Global BMI closing the year with a solid 22% total return in USD. The U.S. was a standout performer, with the S&P 500 posting a 26% total return in 2023, more than offsetting its loss of 18% in 2022.(Click on image to enlarge)
Reversals were also seen at a sector level. Information Technology was the best-performing sector, with an impressive 58% gain in 2023 following a 28% loss in 2022; the sector contributed over 50% of the S&P 500’s return in 2023. Communication Services and Consumer Discretionary also posted strong gains of 56% and 42%, respectively, after steep losses of 40% and 37% in 2022, respectively. Utilities and Energy were the only sectors that closed the year in the red after positive returns in 2022 (see Exhibit 2).(Click on image to enlarge)
At a stock level, the . The so-called “Magnificent Seven,” namely Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla, surged 112% on average over the year, contributing 58% of the S&P 500’s return. Nvidia was the best performer among them, with a 239% gain, and became the 4th-largest stock in the index (up from the 10th position in the beginning of the year). This rally in mega caps resulted in the largest underperformance of the S&P 500 Equal Weight Index2 versus the S&P 500 (-12%) since the equal-weight index’s inception in 2003 (see Exhibit 3). With the Magnificent Seven rising 4% on average versus the S&P 500’s 1% (as of Jan. 19, 2024), the relative performance of mega caps continues to be observed as we enter 2024.(Click on image to enlarge)
1 Data as of Dec. 31, 2022, based on S&P Dow Jones Indices’ .2 The S&P 500 Equal Weight Index (EWI) is the equal-weight version of the S&P 500. The index includes the same constituents as the capitalization-weighted S&P 500, but each company in the S&P 500 EWI is allocated a fixed weight—or 0.2% of the index total at each quarterly rebalance. See more information about this index.More By This Author:The Relative Value Of Insights Twenty-First Century Fox: DJCI Gold Tops Stocks And Bonds This CenturyLooking Into The Future Of Dividend Growth: The S&P 500 High Dividend Growth Index
2023 Market Review For Asian Investors
