Hardship leads to opportunity
Photo: flickr via pingnews
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 the leading British stocks gained 15.02 points or 0.3 percent on December 31st, the last day of trading. That mark means the FTSE 100 Index gained 22 percent for the year. The French CAC – 40 showed similar gains, with a 23 percent gain to close the year. 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 were fueled by depressed stock prices because of 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 along with Europe’s impressive gains would be a heck of a year, if circumstances weren’t bad. These gains were easily out-paced by the Asian markets, however. The Shanghai index and the Hang Seng of Hong Kong saw increases of 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 sobering perspective can be arrived at by making a much broader analysis. Though the U.S. and Europe had considerable gains for the year, the stock markets are technically still down from a decade ago. Europe is down, from a decade ago, 22 percent even factoring in the 22 percent gain this year. The CAC – 40, of France, had a similar story of being down 35 percent from 10 years ago. Germany did better, as the DAX was only down 14 percent from a decade 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 point out currency exchange rates as a possible route to better than average gains in 2010. Currency exchange rates have remained relatively steady from start to finish for the year. An indicator has been the rise in 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 keeps showing 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.
