Stock markets around the world are at an important crossroads.
The blog's regular 6 monthly review compares today's market levels with their 2007/8 pre-Crisis peaks. And as can be seen, none have yet hit a new high. This is quite surprising, given the scale of the G20 and central bank stimulus/liquidity packages over the past 2 years:
• Brazil (lilac column) has been the best performer, down just 9%
• India (light brown): UK (brown): Germany (green) are down 13%
• The USA (dark blue) is down 17%, and Russia (light blue) is down 22%
• Japan (purple) is down 43%, and China (blue-green) down 51%
Interestingly, however, the yield on the world's benchmark long bond, the US 30 year bond (light green), is down 8%. It is therefore the only market where prices have risen (bond prices rise when interest rates fall). This may provide support for the blog's argument on the long-term attractions of G7 interest rates, as published in the Financial Times last year.
The question, of course, as noted in the 'Budgeting for Uncertainty' White Paper, is 'What happens next?' Governments have spent $12 trillion on supporting financial markets since their low-point just 2 years ago. Now we will start to find out whether all this cash has really helped to created a sustainable recovery in the real world outside financial markets.