Sunday, 30 October 2011

World Markets Weekend Review: The Huge Relief Rally

Talk about relief! The S&P 500 closed the week with an impressive gain of 3.78% -- and it was the worst performer in our international gang of eight! The Hang Seng takes the blue ribbon with an astonishing gain of 11.06%, with the Shanghai, DAX and SENSEX in a near dead heat for second place, all with 6% plus gains. The massive bounce was, of course, predicated on the assumption that the Eurozone has its act together with an agreed and practical strategy for its sovereign debt crisis. Will next week be a continuation of the rally? Some consolidation? Or some serious second thoughts about the path ahead?

The tables below provide a concise overview of performance comparisons over the past four weeks for these seven major indexes. I've also included the average for each week so that we can evaluate the performance of a specific index relative to the overall mean and better understand weekly volatility. The colors for each index name help us visualize the comparative performance over time.

The chart below illustrates the comparative performance of World Markets since March 9, 2009. The start date is arbitrary: The S&P 500, CAC 40 and BSE SENSEX hit their lows on March 9th, the Nikkei 225 on March 10th, the DAX on March 6th, the FTSE on March 3rd, the Shanghai Composite on November 4, 2008, and the Hang Seng even earlier on October 27, 2008. However, by aligning on the same day and measuring the percent change, we get a better sense of the relative performance than if we align the lows.

A Longer Look Back

Here is the same chart starting from the turn of 21st century. The relative over-performance of the emerging markets (Shanghai, Mumbai, Hang Seng) is readily apparent.

by: Doug Short


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