Stock markets – celebrating one year of gains, but only Chile above 2007 peak

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The bull market that commenced on March 9, 2009, has just market its first anniversary. A summary of the movements of major global stock markets for the past 12 months, as well as various other measurement periods, is given in the table below.

The MSCI World Index notched up one-year gains of 70.5%, whereas the MSCI Emerging Markets Index was on fire with +103.2%. As far as the US indices are concerned, the Dow Jones Industrial Index (+61.4%) and the S&P 500 Index (+68.6%) underperformed mature markets, but the Nasdaq Composite Index (+84.5%) and the Russell 2000 Index (+95.1%) gave investors reason to smile.

BRIC countries such as Russia (+117.5%) and India (+109.0%) were in the lead on the performance rankings, but China (+44.9%) – the first country to commence a bull market advance in November 2008 – has slipped badly over the past few months.

Notwithstanding the huge rally since the March lows, only the Chile Stock Market General Index has been able to reclaim its 2007 pre-crisis peak and is now trading 8.4% higher. Mexico and Israel could be the next countries to eliminate the bear market losses. The Dow Jones Industrial index and the S&P 500 Index are still 25.4% and 27.1% respectively down on their October 2007 bull market peaks.

Click here or on the table below for a larger image.

grafiek-11-maart-2010

Considering stock market performance against the background of economic growth, Asha Bangalore (Northern Trust) said: “Real GDP growth across the world is yet to match the noticeable gains seen in equity prices during the past year. The US economy largely held steady on a fourth-to-fourth-quarter basis in 2009.  Growth in the European Union fell 2.3% in the final three months of 2009 on a year-to-year basis. Real GDP advanced at a rapid clip in China (+10.7%), while India (+6.1%) and Australia (+2.1%) also recorded gains in real GDP in 2009. Although equity prices advanced in Argentina and Brazil in the last 12 months, real GDP fell 0.3% in Argentina and 1.5% in Brazil during in the third quarter of 2009 compared with the year ago level.

“Typically, equity prices are leading indicators of economic growth. Based on this consideration, are the sharp upward movements of equity prices over the past year sending a message of robust economic growth in the quarters ahead? The answer depends on the economy in question. With regards to the US economy, credit market headwinds and weak labor market conditions cast a shadow on the possibility of a strong recovery.”

Be cautious out there!

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