Ongoing credit market turmoil and a rapidly deteriorating economic outlook have hit global equities very hard.
Ongoing credit crunch worries and evidence of resultant effects on the global economy are diminishing the remnants of confidence among investors. Investors are fleeing all risk assets indiscriminately, moving into safe havens such as cash and government securities. Widening concerns of global bank failures continue (regardless of last week’s approval of the U.S. TARP program, now anti-climactic), bringing about runs on banks in several countries and preventing financial institutions from lending to one another.
Germany and Denmark announced guarantees on all private deposits following Ireland’s first-mover decision last week. Looks like we’ll have to wait for Europe to come to some unified solution such as a concerted bailout, and some nationalization of the banking sector in some of the larger markets.
Equity markets across the world have been reeling lately, and our trading range charts for indices of 22 countries highlight the carnage. Countries to recently take big hits include Brazil, Canada, South Africa, and of course, Russia. Any time the price moves below the green shading, it is trading more than 2 standard deviations below its 50-day moving average. Below the green shading is considered extreme oversold territory, and prices don’t typically stay that oversold for extended periods of time.
The one positive chart might be India’s Sensex index that has moved back above its 50-day moving average recently and formed a short-term uptrend.
August 25, 2008 - Courtesy: Bespoke Investment Group - The MSCI World index, which measures global equity market performance, is now up just 68% (not total return) since its bottom on March 12, 2003. After analyzing the performance of various country indices since then, we found some interesting results.
Since the 3/12/03 global market bottom, Brazil, India and Mexico all have total returns of more than 400%, with Brazil leading the way at 427%. Germany has been the best performing Western European country with a total return of 187%. At the bottom of the barrel is Japan, with a gain of 68%, but unfortunately the US ranks second to last at 77%. So while much has been made of how well the US has held up during this downturn, it still lags behind pretty much everyone else when looking at the last bull and the current bear. The most surprising performance number comes from China. After its bubble and bust from 2005 to present, China’s performance is pretty much right inline with the US at 79%. With so much focus on China’s growth this decade, one would think its equity markets would be at the top of the performance ladder with other BRIC countries.
June 24, 2008 - Courtesy of Bespoke Investment Group - The recent selloff in equities has really spared no one. As shown in our trading range charts below of 22 major country indices, the trend has been down across the board in recent weeks. Even Brazil, Mexico and Russia, who had all held up relatively well this year, have sold off quite a bit. Currently, 19 of the 22 countries are trading in oversold territory (Canada, Japan and Russia are neutral). European countries like France, Germany and Italy have really taken it on the chin, while China and India remain the biggest losers in 2008. After forming short-term uptrends off of the March lows, global equity markets have now lost most of their gains and are looking to move back into downtrends.
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Wall Street Journal's What's News, Nov. 18, 2008by The Wall Street Journal
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Ongoing credit market turmoil and a rapidly deteriorating economic outlook have hit global equities very hard. 
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