Over the past week world markets have again provided evidence of the so-called January Effect, with all eight of our benchmark indexes posting healthy gains. You know it’s a good week when the worst performer (the FTSE 100) posted a healthy 1.63% gain. The two best performers rose by more than 4%. The CAC 40, recently downgraded by Standard & Poor’s, thumbed its nose at the rating agency with a 3.91% gain.
The S&P 500, up 4.59% so far this month, is widely reported in the popular press as having its best January since 1987, when the index gained 9.17% over the equivalent timeframe. We certainly hope the 500 doesn’t share the more memorable characteristic of 1987, Black Monday on October 19th of that year, a shocking 21.47% one-day decline within a 33.51% peak-to-trough collapse in 71 market days (August 25th to December 4th).
The adjacent table shows the year-to-date performance of our gang of eight for 2012. The Hang Seng is only fractionally below that stellar S&P gain of 1987. The DAXK (i.e., the DAX ex dividends) is in second place, only fractionally ahead of the SENSEX. Indeed, the S&P 500’s strong performance only rates a sixth place in YTD gains. As the first of the two charts below clearly illustrate, we’re experiencing a worldwide rally off interim lows stretch from late September for the CAC 40, early October for the S&P 500, FTSE 100 and Hang Seng, late November for the Nikkei 225, mid-December for the SENSEX, and early January for the Shanghai Composite.
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 colours for each index name help us visualise 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 per cent 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, Hang Seng) is readily apparent.
Check back next weekend for a new update.
Note from dshort: At the suggestion of Joerg Willig, a finance professional in Germany, I replaced the DAX index, which includes dividends, with the price-only DAXK. This change levels the playing field, so to speak, for our international comparisons.