Stock Market Performance Round-up: Going Nowhere Fast

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“All the things they said would happen to you
Don’t you know they’re all coming true
Goin’ nowhere fast

“Nothing’s strange as when it seems
You’re living out all your worst possible dreams
Goin’ nowhere fast”

Beck Hansen’s lyrics might have been written in the late 80s, but global stock markets were dancing to the same despondent tune during August. Gloomy sentiment about credit woes and a worsening global economic picture dampened investor sentiment, resulting in a down-month for most markets. Although the MSCI World Index (-1.6%) managed to hold its mid-July trough, the MSCI Emerging Markets Index (-8.2%) was less fortunate and recorded fresh lows for 2008.

The biggest loser for the month was the Russian Trading System Index, which declined by 16.3% on the back of increasing concerns about the broader implications of Russia’s confrontation with Georgia, governance issues and lower oil prices.

Talk of government’s economic stimulus measures in China failed to gain traction from investors, resulting in the Shanghai Composite Index (-13.6%) occupying the second-last position in the monthly rankings.

Thanks to Brazil, yet another BRIC country made it into the bottom three as the slide in commodity prices negatively impacted the Bovespa Index, pushing the benchmark 7.2% into the red.

The relatively stable performance of the Bombay Sensex 30 Index and an overall improvement towards the end of the month saved the SPDR S&P BRIC 40 ETF (BIK) from an even worse performance.

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Notwithstanding a volatile period, the US, UK and continental European markets (with the exception of the German Xetra Dax Index) managed to close in positive territory.

Particularly noteworthy is the chart of the MSCI World Index relative to the MSCI Emerging Markets Index, showing solid outperformance by developed markets since the peaks of May 2008.

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Not a single index registered a gain for the first seven months of 2008. Declines in China (-54.4%), Hong Kong (-28.2%) and Russia (-28.1%) are nothing short of a crash.

Needless to say, all stock markets, in both local currency and dollar terms, are significantly down from their respective bull market highs. It is cold comfort, but the small-cap Russell 2000 Index, with a decline of “only” 13.6%, put in the best performance since its high (recorded in July 2007 – three months prior to the US large-cap indices peaking).

Although the Shanghai Composite Index has returned a catastrophic -60.6% since its 2007 high, the Index is still up by 95.6% over the past three years, 60.6% over five years and 99.8% over 10 years. The comparative figures for the S&P 500 Index are: three years: +5.3%; five years: +25.0% and 10 years: +31.7%.

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Seasonality indicates that “September has firmly secured the rank as the worst month of the year” (Stock Trader’s Almanac), but that a year-end rally typically starts in late September / early October.

My views on the market were summarized in Words from the Wise on August 31, but are repeated here for the sake of completeness.

“I do believe we are still in a primary bear market where stock markets are, at best, faced with a prolonged convalescence period characterized by sub-optimal returns. Whether significant further declines will take place from these levels and valuations overshoot to bargain levels is anybody’s guess.

“However, in the short term I give the nascent stock market rallies the benefit of the doubt provided the mid-July lows are sustained. For any rally to become more enduring will require further base building and an eventual shift in central bank policy to targeting GDP growth rather than inflation.”

Click on the image below for a larger table.

gs-local.jpg

Click on the image below for a larger table.

gs-dollar.jpg

Click on the thumbnail below for a more comprehensive list of global stock market index movements (in US dollar terms).

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6 comments to Stock Market Performance Round-up: Going Nowhere Fast

  • Michael Mennell

    These tables are useful as at a glance one can see how poorly world mkts have been this past 12 months. Hard to call the bottom but agree with Prieur’s sentiments. Volatility is also a feature.

  • Stock Market Performance Round-up: Going Nowhere Fast…

    Gloomy sentiment about credit woes and a worsening global economic picture dampened investor sentiment, resulting in a down-month for most global stock markets in August. I have put together a table of global stock markets’ performances over various m…

  • Max Makhija

    It is relative stupidity not to realise the facts as below:
    USA and G7 members control all the equations.
    It is after this G7 meet that the USD became strong.
    It is after this G7 meet that the stability to stocks have resulted.
    Its is after this G7 meet that the Oil and commodity cycle has been broken.
    Little do we realise that controlling the world at the highest level is not the simplest of things.
    For this many a factors have to be combined and a powerful group like G7 controls the fate of the world by acting in synonomus direction of change.
    This is the biggest monopoly of the world.
    This is why other nations remain poor and continue to suffer.
    As G7 can move mountains and make mole hills out of them or any given situation, the Power of G7 is something that everyone in the world should wake up to.

    After all we wake up to Colgate, use Gillete, use Listerine, wear US/European branded Garments,shoes,belts,bags,perfumes,watches…we drive US/European Cars and we buy thier fuel… most of the world is controlled by the Rich and we keep on making them more and more Rich…..

    Question is do we exist ? in reality we do but if you look at it closely our herd mentality means we do not exist as we are not the leaders but the followers of the World’s strongest Nations of G7….

    Whereas i am not against the G7 but I see little in the investment world that seems to suggest that why this kind of dominance should be given to 7 nations of the world, whereas the other nations suffer and become more and more poorer by the day, to survive on World bank Aid ?

    Balancing the world would mean this kind of Power gap has to be reduced and more players in the world should be included in the world’s power game.

    Either we surrender or we win, winning doesnot seem to be happening so we surrender – HEIL G7 !
    The new Hitler of our Times.

  • Agree, long term bearish market, my Stock Market Forecast for Next 8 Years – 7 bear years to come. However, possible rebound in Sept 08

    http://smartinvesting18.blogspot.com

  • Prieur – as usual a competent, thorough and valuable survey. Concur with your longer-term bearish outlook but do think we’re in a Keynsian moment…you know markets can remain irrational… :). That said there’s a good Bloomberg story this morning about continued over-optimism on the earnings outlook and future shocks to the analysts when economic realities set in. As that happens to align with my own published views going back to Jan. needless to say I agree. While the world’s economies are slowing the US is headed for recovery meme is wrong-headed in my view. In fact I belive we’re crossing a major tipping point into a more severe downturn http://tinyurl.com/5ela5n
    and migrating away from the credit collapse surface problems and into a normal business cycle downturn: http://tinyurl.com/6ybx75

  • Very good analysis but the finishing statement says you are also one of those myopic people who still believe the central bankers should look at GDP and not inflation!!! With my due respect to your economic knowledge, I must tell that all this mess is the result of Great Greenspan’s moronic policies of keeping interest rates so low for so long to fuel the housing and credit bubble. US needs a Paul Volcker today, not a Greenspan or Bernake.

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