World Markets Review: Make That A Four-Week Rally

For the fourth consecutive week, the average performance of the eight world indexes on my watch list has been positive -- this past week by 1.22%, virtually identical to last week's average of 1.25%. And like the previous week, the latest average smooths a considerable range. The top performer, again, was the Shanghai Composite, up 4.31% for the week after a gain of 4.12% the previous week. The Shanghai story is more dramatic than the weekly close suggests. The index is up 9.74% in nine sessions. Asia-Pacific indexes nabbed the top three slots, with Japan's Nikkei up 2.21% and Hong Kong's Hang Seng up 1.87%.

At the other end of the wide range of weekly performances was the other Asian index on our watch list. India's SENSEX declined 0.55%, with the S&P 500 in next-to-last with a 0.32% loss.

The Shanghai remains the only index on the watch list in bear territory -- the traditional designation for a 20% decline from an interim high. See the table inset (lower right) in the chart below. Despite its huge nine-day rally, the index is still down 38% from its interim high of August 2009. At the other end of the inset, the FTSE is in the top spot for the second week and is now a mere 2.78% from its interim high, set in February 2011. The S&P 500 is close behind at 3.56% from its interim high of September 14th, the day after QE3 was announced.

As for 2012 performances, here is a table highlighting the year-to-date gains, sorted in that order, and the 2012 interim highs for the eight indexes. India's SENSEX has the top spot, up nearly 25% and only about a percent off its YTD high. Germany's DAXK is in second, with the Hang Seng not far behind in third place. Actually Friday's close was the Hang Seng's YTD high. In contrast, the Shanghai continues to hold the distinction of being the only index with a YTD loss, down 2.22%. But its current trend makes it a good bet for finishing the year with a gain.


A Closer Look at the Last Four Weeks

The tables below provide a concise overview of performance comparisons over the past four weeks for these eight major indexes. I've also included the average for each week so that we can evaluate the performance of a specific index relative to the overall mean and better understand weekly volatility. The colors for each index name help us visualize the comparative performance over time.


The chart below illustrates the comparative performance of World Markets since March 9, 2009. The start date is arbitrary: The S&P 500, CAC 40 and BSE SENSEX hit their lows on March 9th, the Nikkei 225 on March 10th, the DAX on March 6th, the FTSE on March 3rd, the Shanghai Composite on November 4, 2008, and the Hang Seng even earlier on October 27, 2008. However, by aligning on the same day and measuring the percent change, we get a better sense of the relative performance than if we align the lows.


A Longer Look Back

Here is the same chart starting from the turn of 21st century. The relative over-performance of the emerging markets (Shanghai, Mumbai SENSEX, Hang Seng) is readily apparent, especially the SENSEX, but the trend over the past two years has not been their friend (make that three years for the Shanghai).


Check back next weekend for a new update.