Thursday, October 14, 2010

World Stock Market Cap Hits A 26-Mo. High in Sept.

According to the World Federation of Exchanges, a Paris-based association of 52 stock exchanges around the world, the world stock market capitalization reached more than $50 trillion in September, the highest monthly value in 26 months, since July 2008.  That was an increase of almost $4 trillion (and 8.2%) compared to the $46.4 trillion value of global equities in August, and a $10 trillion increase since September of last year.  Compared to the cyclical low of $26.6 trillion in February 2009 from the effects of the financial crisis and global economic slowdown, the world stock market capitalization has now almost doubled to $50.2 trillion last month, a gain of 89% in the last 19 months. 

A lot of the growth in world equity values over the last year has been driven by strong returns in the emerging markets (17.5% overall for the MSCI Emerging Markets Index), with especially strong returns over the last 12 months in countries like Chile (53%), Colombia (48%), Turkey (44%), Thailand (43.5%), Indonesia (39%), Philippines (29%) and India (27.5%).  In contrast, developed markets have underperformed the emerging markets over the last year, with returns of 3.3% for Europe, 10% for North America and 4.4% for the Pacific region (data here). 

This strong rebound in global equity valuation to a 26-month high in September of $50 trillion is evidence that the world economies are making a gradual comeback from the 2008-2009 recession and financial crisis, and also means the chances of a global-based double-dip recession are fading away.  

See Scott Grannis' related post "Global Equities Mark a Post-Recession High."


At 10/15/2010 9:54 AM, Blogger Buddy R Pacifico said...

If the recovery in worldwide equities can persit into next year then the chances for sustained economic growth is very good.

The Wealth Effect of feeling richer without more cash will mean more consumer demand for durables around the world.

It takes some time (up to a year) to see the results of the wealth effect. People need to see higher valuations in their brokerage statements for a couple of months. Then, when people "feel richer", they start purchasing but it takes some time for the durable orders to process.


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