Prieur Perspective: The Calm After the Storm?

Changing the digits on the calendar from ’08 to ’09 may not have transformed the dire outlook for the global economy - but during the holiday-shortened New Year week, investors appeared adamant to put the rout of 2008 behind them.

Although the door has mercifully been closed on 2008, let’s recap some of the unprecedented movements experienced in financial markets during the year.

Equities:
 

• MSCI World Index: -42.1% (worst yearly performance since start of Index in 1970)
  
  
• S&P 500 Index: -38.5% (worst annual percentage decline since 1937 and 3rd worst on record; largest quarterly [4th quarter: -298] and daily [September 29th: -107] points decline ever; 6th worst daily percentage decline [October 15th: -9.0%])
  
  
• Dow Jones Industrial Index: -33.8% (worst annual percentage decline since 1931 and 3rd worst on record; largest quarterly [4th quarter: -2,330] and daily [September 29th: -778] points decline ever; 6th worst daily percentage decline [October 15th: -7.9%])
  
  
• S&P 500 and Dow Jones: There was no point in 2008 where the indices were up for the year at the close of a trading day. Since 1900, 2008 was only the 4th year (after 1910, 1962 and 1977) where the Dow never had a single day where it closed up for the year, according to Bespoke.
  
  
• FTSE Eurofirst 300 Index: -44.8% (worst yearly percentage fall since its creation in 1986)
  
  
• Nikkei 225 Average: -42.1% (biggest annual percentage decline on record)
  
  
• CBOE Volatility Index (VIX): Historical high in November based on new calculation, but remained below levels seen during the 1987 crash based on an previous calculation.

Treasuries:
 

• US Treasuries: Yields dropped to lowest levels since 1950.
  
  
• US 10-year Treasury Notes: Yields fell by 182 basis points – biggest yearly points decline since 1995 and the second biggest in the last 20 years.

Currencies:
 

• Japanese Trade-weighted Index: +25.0% (largest annual rise since currency was allowed to float freely in 1973)
  
  
• Pound against US dollar: -26.2% (worst annual decline since gold standard was abandoned in 1971)
  
  
• Pound against euro: -22.8% (worst yearly decline since launch of single currency in 1999)

Commodities:
 

• Reuters/Jeffries CRB Index: -36.0% (worst annual performance since inception of Index in 1956)

The table below highlights the performance of the principal asset classes for 2008. While West Texas Intermediate Crude (-53.5%), the S&P 500 Index (-38.5%) and the Reuters/Jeffries CRB Index (-36.0%) recorded large losses, US 30-year Treasury Bonds (+18.6%) fared very well, and the US Dollar Index (+6.0%) and gold bullion (+5.5%) also provided safe havens for risk-averse investors. (The returns for indices in individual countries are given in my December 31st “Stock market performance round-up.")


Click to enlarge