102-04 The Global Markets Compared

What are the best stock markets to invest in?

In terms of regulation and choice, the North American, Australian and European Stock Market are the place to go, with vast numbers of companies floated on these exchanges you can always find companies that meet your criteria.

In terms of high-end growth, China and India are the highest performing stock markets since the financial crisis.

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Global Stock Markets – Do the global stock markets move in sync?

Do the global stock markets move in a synchronized manner with each other, and if so, why?

You can plot the chart in a way that shows a similar starting point; the bottom of the global financial crisis in 2008.  This is a good starting point as nearly all indexes crashed horribly at the same time.  Also, as the comparison chart above does not show values but percentage change, March 2009 is the perfect point.

What the Global Markets have in common

Upon initially viewing the chart, you can see a number of important similarities.

  • In general, they move in the same direction.
  • Although an individual day may have a positive result for the Sensex and a negative result for the FTSE, we clearly see that major fluctuations occur in a synchronized way.   Perhaps this is due to the fact that global news of serious macroeconomic significance ripples through the markets as they open for trading, causing the “Big Money” to make market corrections.
  • There are key pivot points in the global economy where all markets will change direction at the same time.  For example, in March 2009 (direction up), June 2009 (direction down) July 2009 (direction up) April 2010 (direction down), and so on.

Performance is the difference in Global Markets.

We can plot on the chart some of the key global market reversals, as previously discussed.  But, it is also important to notice that although the markets are roughly synchronized, the momentum that some indexes carry into the trend is a lot stronger than others. For example, the Sensex (India) exploded upwards in March 2009 for an 80% increase in just four months, leaving other indexes behind.  Very dynamic!

Stock Market Direction & Performance since the Financial Crisis

  1. Sensex – The Sensex is by far the best performer out of all the major indices; it was in an intermediate uptrend in mid-2010 and is challenging to move to new “post-crash” highs.  It has doubled in worth since March 2009.
  2. Hang Seng – The second-best performer with a circa 65% increase from March 2009 to July 2010.  The index peaked in November 2009 and has been in a slow, shallow downtrend since then.
  3. Standard & Poors 500 – Peaked in May 2010 having increased 77%, but has since slipped back to a 58% gain – our third-best performer.
  4. FTSE 100 – Also peaked in May 2010 and with a similar pattern to the US markets, but unfortunately, a much poorer recovery – the fourth-best performer managing only a 40% increase.
  5. Nikkei 225 – Japan’s flagship index has only managed a meager 24% improvement.  It is by far the worst performer and in 2010 is in a very solid downtrend.

Check the trends now for yourself and try to decide what stock market is performing the best.

The Long Term View of the Markets

Of course, this recovery league table we have here has to be considered within the bigger picture.  For example :

  • How far did the indexes drop during the crash?
  • How much of that loss have they recovered?
  • How much more volatile is one stock market index versus another?

Here you can see pre-crash and post-crash view; in this chart, I have also included the German DAX.

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