Chart of the Week: Global equity market rally continues into 2018

The global equity market rally has continued into the first trading week of 2018, with global equity indices reaching unprecedented levels.

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We expect equities to remain well supported for most of this year, even though we see them as around 40% overvalued on the basis of fundamentals. All three main indices in the US — the NASDAQ, S&P 500 and the Dow Jones — managed to top record highs on the back of a strong ISM manufacturing survey last Wednesday. (The new orders index climbed to a 14-year high of 69.4.) Japan, a nation reliant on exports to the US, also saw a rally on the back of this, with the Nikkei 225 making significant gains, while strong economic data in the euro area also lifted sentiment. Supported by high oil prices, with commodity producers such as Shell and BP benefiting, the UK FTSE 100 extended its rally, with the index reaching over 7700 last Thursday and Friday.

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