Sunday, January 1, 2012

World Stock Market Performance in 2011

Percent change in eight stock markets in 2010 and 2011. January 2011 is normalized to zero.

Everyone who is paying attention knows that the stocks were flat in 2011, which means that the S&P 500 went up by only 0.1%.

The graph above has eight stock market indexes, all normalized to 0% on January 1 2011. You can see the big crash in mid-July. The Wilshire 5000 changed less than 1%, and the Nasdaq actually went down.

On the bright side the Dow 30 are actually up. Of course the Dow is often talked about, but isn't really that important.

Foreign indexes are down big. The formerly high flying Chinese Hang Seng crashed 20%. Japan's Nikkei continues its losing streak, going down another 17%. Germany's Dax went down 15% due to the fraying Euro-zone.

Gains and losses in eight stock markets since January 2010.
Still grasping for a silver lining? Two year returns were decent in the US, and bad everywhere else.  This does not make sense, since business in the US has obviously been bad. First, the market must have been over-sold in 2009. Second, corporate profits have been pretty good.

What does this mean going forward?  Past results usually foreshadow the opposite result in the future since stock traders usually overplay the underlaying trend.  Since Europe and Asia are over-sold today,  then they probably will do better next year.