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Hardship leads to opportunity

March, 2009 marked a low point in the global economy including world stocks. The gains have been great on the stock exchanges since that point despite continued economic struggles across the globe. The Associated Press reports that a lot of markets had gains of 50 percent or better from March to the end of the year. The FTSE 100 Index of the leading British stocks gained 15.02 points or 0.3 percent at the close of trading December 31st. This mark means the FTSE 100 Index gained 22 percent over 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 expected to post an approximate 20 percent gain 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. The Shanghai index and the Hang Seng of Hong Kong saw increases of 80 percent and 50 percent, respectively. Analysts predict continued strong growth in both of these markets for the coming year and beyond.

A sobering historical perspective

2009 yielded tremendous growth from where it started to where it finished. Investors can stay happy if they have only a short term view. A more sobering perspective can be gained by broadening the scope of the analysis. 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. France’s CAC-40 is a similar story down 35 percent from ten years ago. Germany did better, as the DAX was only down 14 percent from a decade 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 are pointing to the currency exchange rates as a possible arena for better than average gains for 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. Optimism is from investors thinking the U.S. Federal reserve will start raising interest rates to head off inflation as the U.S. economy continues to show 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.