Hardship leads to opportunity
Photo: sasd.k12.pa.us
March, 2009 marked a low point in the global economy including world stocks. Gains have been great for stock exchanges since then though economies have been sluggish worldwide. The Associated Press reports that a lot of markets had gains of 50 percent or better from March to the end of the year. The FTSE 100 Index of leading British stocks gained 15.02 points or 0.3 percent at the close of trading December 31st. 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 have been fueled by depressed stock prices due to 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 are predicting strong growth to perpetuate in both markets for the next 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. Even 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 fared slightly better with the DAX down only 14 percent from 10 years 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 are pointing to the currency exchange rates as a possible arena for better than average gains for 2010. Currency exchange rates have remained relatively steady from start to finish for the year. One indicator has been the rise of the U.S. dollar at year’s end. The dollar was up .3 percent in London to end the year. Optimism is from investors thinking the U.S. Federal reserve will begin to raise interest rates to head off inflationary tendencies as the U.S. economy continues to show 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.
