Stock Market Weekend Update: Rally Climbs the Wall of Worry

Six up Six up (one up big), and two down. That, in a nutshell, is the story from the eight world indexes on my weekly watch list. Japan’s Nikkei 225 surged 5.08% last week, and that comes on top of its 3.51% gain the week before. The S&P 500 and FTSE 100 were in distant second and third place with 2.29% and 2.15% gains, respectively. You know it’s a good week when the two middle-of-the-pack indexes, France’s CAC 40 and Hong Kong’s Hang Seng, posted strong gains in the upper one percent range. China’s Shanghai and India’s SENSEX were the two losers, down 0.83% and 1.13% respectively.

The Shanghai remains the only index on the watch list in bear territory — the traditional designation for a 20% decline from an interim high. See the table inset (lower right) in the chart below. The index is down over 36% from its interim high of August 2009. At the other end of the inset, the S&P 500 closed the week just shy of its all-time high set on Thursday.

Here is a table highlighting the 2013 year-to-date gains, sorted in that order, along with the 2013 interim highs for the eight indexes. The sustained advance of the Japan’s Nikkei puts it solidly in the top spot, approaching three times the gain of the second place S&P 500. While the Nikkei is the top performer, its three Asia-Pacific neighbors, Hong Kong’s Hang Seng, China’s Shanghai Composite and India’s SENSEX have performed the worst in 2013, all with YTD losses.

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 SENSEX, Hang Seng) is readily apparent, especially the SENSEX, but the trend over the past two years has not been their friend (make that three years for the Shanghai).

Click for a larger image
Doug Short Ph.d is the author of dshort at Advisor Perspectives.