Crime and Punishment

There is no doubt the financial market crisis is perpetrated by Americans. American homeowners decided to speculate on housing prices. American lenders lent irresponsibly. American borrowers decided not to honor their debt. American financial institutions packaged and sold mortgage backed securities to other American investors and to investors around the world. American bond rating agencies rated those garbage bonds AAA. American companies went bankrupt or had to be rescued by the American government. With all that said, it’s ironic the American stock market isn’t the most severely punished.

Far from it. If you look at this chart published by New York Times, the American stock market was one of the best in the world in 2008. Other countries are down much more. In case New York Times removes that chart in the future, let me write down a few numbers (all numbers are Jan 1, 2008 through Sept. 18, 2008):

United States -16.4%
Canada -21.0%
Japan -21.4%
Germany -31.2%
Brazil -31.4%
Russia -53.3%
India -47.9%
China -47.9%

These return numbers are based on the U.S. dollar. Because the U.S. dollar has gone down against most other currencies, if measured in local currencies, those markets are down even more than what the numbers show.

What does this mean? It means investors worldwide still see the U.S. as the best place for their money. Although it’s the epicenter of the financial crisis, the U.S. stock market isn’t affected by the financial crisis as much as markets elsewhere. If you think the U.S. is bad, the other places are worse, especially the so called BRIC countries.

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Comments

  1. Harry Sit says

    RC – I can’t figure out how to make a direct link, but if you go to Financial Times Market Data World Equities section, there is a “market macromaps” link. It pops up a world map showing the performance of major stock indexes in different countries. You can select the time period on the bottom of the map, from 1 day to 1 year.

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