So far 2012 has lived up to the volatility we anticipated back in January. We’ve had a massive market rally followed by a rather significant correction. Central bank and government intervention caused quite a spike in risk assets at the beginning of the year, but renewed debt worries coupled with a significant global growth slowdown (particularly in Europe) have caused a market U-turn this spring.
Now seems likes as good a time as any to stop and assess our position. To put the moves we’ve seen into perspective, I’ve prepared a chart to show how the magnitude of the recent (and ongoing) correction varies across several global stock indices and a couple of key commodities.
Global Indices: You Are Here
|Index||Recent Top (Date)||% Change since Top||% Change 2012|
|S&P 500||April 2||-8.9%||+2.9%|
|Nasdaq 100||April 3||-11.3%||+6.7%|
|Dow 30||May 1||-7.3%||+1.2%|
|FTSE (UK)||March 14||-12%||-5.5%|
|DAX (Germany)||March 16||-12.8%||+6.3%|
|Oil (WTIC)||March 1||-17.3%||-8.3%|
Notice that U.S. and Japanese markets were the last to top out while Canada’s TSX was among the first. I’m not sure what to make of that except that Canada’s commodity-heavy market may have been anticipating a global growth slowdown. While the Nikkei was late to turn lower, its descent seems to have been a little steeper so far.
Looking at these results by region, it’s not at all surprising to see the PIGS (Portugal, Italy, Greece and Spain) under performing so dramatically given their precarious debt loads. It is worth noting, however, that France is clearly not in the same sort of safe-haven category as Germany. This bears watching as most of the focus seems to be on the PIGS at the moment.
The fact that some indices are still positive on the year in spite of sizeable corrections is a testament to the magnitude of the first quarter rally. Strength in the Shanghai Composite seems to be at odds with repeated warnings about China’s slowing economy and real estate bubble. While the index is down this spring, the correction hasn’t been as deep as it has for other indices and it’s still hanging onto decent gains on the year. This is one to watch for sure.
Those are some of the patterns I noticed in these numbers.
What did you see?
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