Global stock markets still depend on low-cost money for support

Financial Events

stocks Sept14The blog’s 6-monthly review of global stock markets highlights the narrow nature of the advance since September 2008, when the blog first began analysing developments.  It shows their performance since the pre-Crisis peak for each market, and the performance of the US 30-year Treasury bond.

Remarkably, only the US, India, Germany and the UK stock markets are in positive territory, along with the 30-year bond.  Japan, Brazil, Russia and China remain well below their previous peaks:

  • The 30-year bond remains the best performer, as investors fear that a sustained economic recovery remains as far away as ever (purple line)
  • The US had been the best stock market performer till now, driven by the US Federal Reserve’s belief that a strong stock market would spur economic recovery (green)
  • India has now become the best performer, due to hopes for broad economic reform from the new Modi government (black)
  • Germany is next, supported by hopes the European Central Bank will continue to follow the Fed’s low-cost money approach (orange)
  • The UK has just slipped into positive territory, also supported by Bank of England stimulus (pink)

A number of major markets remain in negative territory:

  • Japan strengthened in 2012 as the Abe government followed the Fed’s policy, but has recently seen a slowdown as GDP fell in Q2 (blue)
  • Brazil had weakened, despite the World Cup and 2016 Olympics stimulus, but recent polls lead investors to hope for a change of government next month (brown)
  • Russia’s recovery also ended rather early, despite the boost from high oil and commodity prices, and Ukraine developments have caused it to move sideways (red)
  • China’s market has never seen a recovery, as investors have preferred to speculate in the housing bubble, where prices have been doubling every 2 – 3 years (blue)

All-in-all it is hard with the benefit of hindsight to argue with September 2008’s conclusion, as the storm began to break:

This pattern seems to confirm the blog’s long-standing concern that we may now be facing a multi-year global slowdown, as the financial excesses of the 2003-7 boom are unwound.”

Those markets where there has been little direct central bank stimulus have found it very hard to recover.  This is quite contrary to the pre-2008 experience, when ‘a rising tide lifted all ships’.

The blog will look in more detail at the US equity market next week, as it concludes its mini-series on the Great Unwinding of stimulus policy now underway.

PREVIOUS POST

US reaches 'peak car' moment as incentives, inventories rise, whilst fewer Americans carry driving licenses

11/09/2014

The blog’s suggestion back in March that now would be a good time for US r...

Learn more
NEXT POST

Great Unwinding sees dollar rise, oil prices fall

15/09/2014

The day after our China Economic Transformation webinar last week, Premier Li K...

Learn more
More posts
$50bn hole appears in New York financial markets – Fed is “looking into it”
29/09/2019

Most people would quickly notice if $50 went missing from their purse or wallet. They would certainl...

Read
China’s renminbi and the global ring of fire
01/09/2019

China’s property bubble puts it at the epicentre of the ring of fire © Reuters  China’s de...

Read
Stock markets risk Wile E. Coyote fall despite Powell’s rush to support the S&P 500
06/01/2019

How can companies and investors avoid losing money as the global economy goes into a China-led reces...

Read
Why everyone ignored my warnings ahead of the financial crisis
16/09/2018

It’s 10 years since my forecast of a global financial crisis came true, as Lehman Brothers col...

Read
High-flying “story stocks” hit air pockets as credit finally tightens
29/07/2018

“Nobody could ever have seen this coming” is the normal comment after sudden share price...

Read
London house prices slip as supply/demand balances change
22/07/2018

London house prices are “falling at the fastest rate in almost a decade” according to m...

Read
Financial markets party as global trade wars begin
03/06/2018

More people left poverty in the past 70 years than in the whole of history, thanks to the BabyBoomer...

Read
China’s lending bubble is history
27/05/2018

As China’s shadow banking is reined in, the impact on the global economy is already clear, as ...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more