1/26 | The End of Year might not be so Sweet for World Stock Markets
Hardship leads to opportunity
Photo: topnews.in
March, 2009 marked a low point in the global economy including world stocks. The gains have been great on the stock exchanges since that point despite continued economic struggles across the globe. The Associated Press reports that many markets topped 50 percent gains from March through year-end trading. The FTSE 100 Index of the leading British stocks gained 15.02 points or 0.3 percent at the close of trading December 31st. This mark means the FTSE 100 Index gained 22 percent over the year. The French CAC – 40 showed similar gains, with a 23 percent gain to close the year. Germany’s DAX fared even better with a 24 percent annual gain even though it lost a point on the final day of trading. The bull market gains were fueled by depressed stock prices because of the global recession. Lower prices got investors to look for bargains, and as the recession slowed those stocks yielded high returns.
Asian markets set the pace for the year
The U.S Dow Jones industrial average is expected to post an approximate 20 percent gain for the year. U.S. gains along with Europe’s impressive gains would be a heck of a year, if circumstances weren’t bad. Those gains were outpaced with ease by Asian markets. The Shanghai index and the Hang Seng of Hong Kong saw increases of 80 percent and 50 percent, respectively. Analysts are predicting strong growth to perpetuate in both markets for the next year and beyond.
A sobering historical perspective
2009 yielded tremendous growth from where it started to where it finished. Investors can keep smiling if they keep short term blinders on to limit their view. A more sobering perspective can be gained by broadening the scope of the analysis. Though the U.S. and Europe gained considerably for this year, they are down in the stock market even more from a decade ago. Europe is down 22 percent from a decade ago even when factoring in the 22 percent gain for this past year. France’s CAC-40 is a similar story down 35 percent from ten years ago. Germany did better, as the DAX was only down 14 percent from a decade ago.
Where to go from here
Investors and analysts are trying to get a clearer picture of what will happen with the New Year. They struggle with whether stock rallies will continue, or if they’ve topped out again and will level off. Many are pointing to the currency exchange rates as a possible arena for better than average gains for 2010. Currency exchange rates have remained relatively steady from start to finish for the year. One indicator has been the rise of the U.S. dollar at year’s end. The dollar has been up .3 percent in London to end the year. Optimism is from investors thinking the U.S. Federal reserve will start raising interest rates to head off inflation as the U.S. economy keeps showing signs of recovery. U.S. rates for 2009 were at record lows, and had nowhere to go but up in 2010, which makes the dollar a good investment over the next year.