World Markets Review: The Recovery of Japan

The 2012 worldwide rally went into remission last week as the average gain of our basket of eight indexes declined from 0.38% the previous week to -0.45%. Only two of the eight indexes in our basket closed with a weekly gain. The S&P 500 posted a tiny advance of 0.09%, but the top performing Nikkei 225 rose 1.56%. Yesterday, March 11, marks the anniversary of the 2011 earthquake and tsunami and the start of a massive nuclear crisis. The index hit a post-quake low on November 25th, a decline of 22.76% from the daily close before the quake. Friday the Nikkei had risen 21.69% from the November low and is only 4.84% below the pre-quake market close.

The table below shows the 2012 year-to-date performance of our gang of eight. Despite last week's slowdown, six markets are holding on to their double-digit gains at the end of ten weeks, and the S&P 500 is only a percent away from joining the double-digit club. The other two markets continue to have healthy single-digit gains. On a YTD basis even the worst-performing FTSE 100 has a healthy gain of 5.66%.



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 colors for each index name help us visualize 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 percent 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.

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, which is consistent with the other indexes.