World Markets Weekend Update: A Mixed Bag with a Negative Skew

September 13, 2014

by Doug Short

The broad rally of world indexes on my watch list stumbled a bit last week with five of the eight posting losses. Japan's Nikkei was the top performer, up 1.78%. This happened during a week when the Bank of Japan added to its unprecedented monetary policies, now buying short-term Japanese government debt at a negative yield (more here). The Shanghai Composite and BSE SENSEX also finished the week with a gains, although quite tiny ones. The three European Union indexes, the S&P 500 and the Hang Seng suffered losses, with the Hong Kong index was the worst performer, down 2.55%.

The Shanghai Composite remains the only index on the watch list in bear territory -- the traditional designation for a 20% decline from an interim high. The index is down 32.82% from its August 2009 peak. See the table inset (lower right) in the chart below.

Here is a look at 2014 so far.

Here is a table highlighting the year-to-date index performance, sorted from high to low, along with the 2014 interim highs for the eight indexes. At this point, six of the eight are positive YTD, unchanged from last week.

A Closer Look at the Last Four Weeks

The tables below provide a concise overview of performance comparisons over the past four weeks for these eight 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.

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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 SENSEX and Hang Seng) up to their 2007 peaks is evident, and the SENSEX remains by far the top performer. The Shanghai, in contrast, formed a perfect Eiffel Tower from late 2006 to late 2009.

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Check back next week for a new update.


Note from dshort: I track Germany's DAXK a price-only index, instead of the more familiar DAX index (which includes dividends), for constency with the other indexes, which do not include dividends.

All the indexes are calculated in their local currencies.

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