World Stock Markets may hate to see the Year End

World Stock Markets may hate to see the Year End

Photo from Picasa

Photo from Picasa

Hardship leads to opportunity

March, 2009 marked a low point in the global economy including world stocks. The gains have been great on the stock exchanges since that point despite continued economic struggles across the globe. The Associated Press reports that many markets topped 50 percent gains from March through year-end trading. The FTSE 100 Index of leading British stocks gained 15.02 points or 0.3 percent at the close of trading December 31st. That mark means the FTSE 100 Index gained 22 percent for the year. France’s CAC -40 yielded similar gains closing out the year with a 23 percent gain. Germany’s DAX fared even better with a 24 percent annual gain even though it lost a point on the final day of trading. The bull market gains have been fueled by depressed stock prices due to the global recession. The lower prices enticed investors to hunt down bargains and as the recession slowed these stocks yielded high returns.

Asian markets set the pace for the year

The U.S Dow Jones industrial average is expected to post an approximate 20 percent gain for the year. U.S. gains combined with Europe’s impressive gains would be a banner year under normal circumstances. These gains were easily out-paced by the Asian markets, however. China’s Shanghai index and Hong Kong’s Hang Seng rose 80 percent and 50 percent respectively. Analysts predict continued strong growth in both of these markets for the coming year and beyond.

A sobering historical perspective

2009 yielded tremendous growth from where it started to where it finished. Investors can keep smiling if they keep short term blinders on to limit their view. A more sobering perspective can be gained by broadening the scope of the analysis. Even though the U.S. and Europe gained considerably for this year, they are down in the stock market even more from a decade ago. Europe is down 22 percent from a decade ago even when factoring in the 22 percent gain for this past year. France’s CAC-40 is a similar story down 35 percent from ten years ago. Germany fared slightly better with the DAX down only 14 percent from 10 years ago.

Where to go from here

Investors and analysts are trying to get a clearer picture of what will happen with the New Year. They wrangle with the question of whether the stock rally can continue or if it has reached its zenith and will level off to more moderate gains. Many are pointing to the currency exchange rates as a possible arena for better than average gains for 2010. Currency exchange rates have remained relatively steady from start to finish for the year. One indicator has been the rise of the U.S. dollar at year’s end. The dollar was up .3 percent in London to end the year. The optimism stems from investors believing that the U.S. Federal reserve will begin to raise interest rates to head off inflationary tendencies as the U.S. economy continues to show signs of recovery. U.S. rates were at record lows in 2009 with nowhere to go but up in 2010 making the dollar an attractive investment for the coming year.

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