The map at the top of this article represents total return of various stock market indices around the world. It includes both capital gains/losses in each of the countries represented as well as dividend income and currency gains/losses. Since currencies are in constant flux in value relative to one another, shifting foreign exchange rates can often either magnify or reverse gains within the market of a country when they are brought back home and exchanged for the domestic currency of the investor, for example the U.S. Dollar.
Color code is based on total return – returns in a country's home stock market and in currency exchange. Colors are based on returns relative to each other – red is lowest, yellow is close to zero, and green is higher return.
Color code of the second map is based on GDP growth rate.
Green means the economy in question grew faster than the rest of the economies represented, yellow means it stayed roughly at the same growth rate as the rest, and red means it grew more slowly.
If you compare the two maps, you can see that they don’t match each other very well at all. This means that economic growth was not the driver of returns.
Turkey has higher than average GDP growth, despite very poor performance.
Growth was highest in EM Asia, which stands out in this map as the global center of economic growth, even though it was not the global center of investment returns. If that region continues to lead in economic growth and in profit growth, it’s likely that it will lead in investment returns as well. But in the short run, trade war and political fears and resultant value compression are overcome by genuine gains in human productivity.
And returns were also not driven by expectations for future growth:
The only nation in which expectations varied much from 2018 growth rates was Turkey, which surprisingly is still expected to have positive growth, just less positive than current growth. So, neither economic growth, nor expected economic growth were in the driver’s seat for returns last quarter.