Hardship leads to opportunity

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 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 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 were fueled by depressed stock prices because of the global recession. Lower prices got investors to look for bargains, and as the recession slowed those stocks yielded high returns.

Asian markets set the pace for the year

The U.S Dow Jones industrial average is estimated to post a gain of almost 20 percent for the year. U.S. gains combined with Europe’s impressive gains would be a banner year under normal circumstances. Those gains were outpaced with ease by Asian markets. China’s Shanghai index and Hong Kong’s Hang Seng rose 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 more sobering perspective can be gained by broadening the scope of the analysis. Even though the U.S. and Europe gained considerably for this year, they are down in the stock market even more from a decade ago. Europe is down 22 percent from a decade ago even when factoring in the 22 percent gain for this past 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 struggle with whether stock rallies will continue, or if they’ve topped out again and will level off. Many point out currency exchange rates as a possible route to better than average gains in 2010. Currency exchange rates stayed relatively steady over the course of the year. An indicator has been the rise in the U.S. dollar at the end of the year. 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 for 2009 were at record lows, and had nowhere to go but up in 2010, which makes the dollar a good investment over the next year.