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Steve van Emmerik

Excellent overview there of how the year has started! As you suggest it ain't pretty. You'd expect more variation of countries up/down over 4 weeks than you would over 12 months due to noise and short term transitory country or sector specific news/sentiment. So the fact that it's better than 2008 isn't much comfort.

Looking at global equity markets I used the following wide range perspectives/data to try and get a handle on things and conclude that global equity markets have a fair way to fall.

1. Is it meaningful to talk about a global equity market at the moment. Yes - Strong equity market correlations in recessions and this has been the case for a couple of years now.

2. The scope for government action is growing more limited as they run out of monetary and fiscal bullets so there is less ability to support the market.

3. We're unlikely to be in the last 6 months of the recession where equity returns are usually strong.

4. PE ratios stocks are not cheap by historical standards.

5. Equity prices compared to asset prices of the companies are not cheap compared to historical standards during recessions.

6. Primary long term trends in all major stock markets are clearly down

7. How are markets responding to news? Equity markets are rebounding based on possible government actions and falling on the reality of earnings and broader economic data. Given the reality of the coming data the pressure is on the downside.

8. The new administration has given hope but political stockmarket cycles in the US suggest the first two years for the US president are likely to have low returns as the current administration talks things down by blaming the previous administration.

9. If Buffet is buying isn't that a good sign. Yes Buffet has bought some but he doesn't try and time the market and readily admits he often buys in early when markets crash.

It's hard to be optimistic when such a range of data and perspectives say there is plenty of downside.

Be interested in views to the contrary or other perspectives and what matters and why.

I go through all of this in detail at http://reflexivityfinance.blogspot.com/

Steve van Emmerik


It would be helpful to add in a column for market size. While it may be interesting to see that country X is down 13% (and only has a $3bn total market cap), it doesn't really compare if the US is down 13%.


What a difference a year makes. 20% would barely make the list for best stock market in 2010.

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