Bespoke Invest has an updated table of the year-to-date and the month-to-date performances of global equity markets.
I will only show the year-to-date chart.
The month to date chart you can go directly to Bespoke here
Only 18 out of the 78 countries or 23% of the countries in Bespoke’s tally posted positive returns from April 15 to May 15 2011.
Major economies and the BRIC bourses have all been in the red. But the BRIC has underperformed the G-7.
ASEAN bourses largely outperformed most of the world.
On a year to date basis the picture changes; about half of the global equity markets are still in the black or registered positive gains.
Nevertheless the continuing weakness in the markets as a result of many political events is likely to weigh on the above standings.
Again, y-t-d the G-7 economies have outclassed the BRICs, while ASEAN bourses remain slightly above the mean.
Venezuela's Stagflation
An irony is that Venezuela whom just popped out of the recession leaped 10% in May to grab the 2nd spot.
Venezuela’s recovery could merely be statistical considering that the country, despite being an oil exporter, has now been rationing electricity in the face of rolling brownouts.
Nationalization policies have led to a material drop in foreign investments that has contributed to such social blight.
Venezuela’s inflation at 22.9% has hardly been affecting stock price levels.
I’d say the so-called Venezuelan outperformance is a result of government’s money printing in preparation for 2012 Presidential elections.
Venezuela looks more like the movie The Curious Case of Benjamin Button. Venezuela stagflationary environment has exhibited an interesting phenomenon of a rising stock market amidst a recessionary environment and high unemployment.
As stated before, for me, the Venezuela's Chavez regime seems like a prime candidate for Zimbabwe 2.0.
Implication of the Changes in the Ratio of Emerging Market-US Equity
Yet the outperformance of the US relative to Emerging Markets should be seen from the bigger picture.
Again chart above courtesy of Bespoke.
EM bourses have largely bested US markets at the start of the recovery or since November 2008 until its peak on November 2010 (see red trend line).
Presently such trend seems to have reversed. (see blue line which forms a wedge)
I am not sure if this means that EM would start underperforming over the coming months or if this represents plain consolidation or a pause prior to the next up leg. Although I am inclined to think the latter.
Besides it’s no good news to suggest that the US outperforms the world considering that globalization has been reducing the US share contribution to the global economy. (in 1960 US share is 39%, in 2009 it was 24.23%)
This only implies that perhaps tightening of money conditions could have been taking hold outside the US, and may affect the global economy, which appears to be exhibited by current stock market performances. And this may eventually will get transmitted to the US.
One would further note that the previous market top in 2007-2008 was defined by a consolidation phase between the EM economies and US markets before the Lehman crash in October 2008 (see green oval).
So while home biased US managers see this as good news, this ain’t one for me.
Let me be clear: This isn’t a case to be strongly bearish yet. Although this should serve a yellow flag, which requires more confirmation or falsification.
