Standard & Poor’s (S&P) Global Equity Indices measure the US dollar price change in the stock markets covered by the S&P Global Broad Market Index (BMI) and the S&P Frontier Broad Market Index (BMI) country indices.
The Global BMI consists of 46 developed and emerging market countries, and the Frontier BMI is made up of 34 relatively small and illiquid markets. Each index includes a broad range of small, medium, and large cap companies within those countries.
Global equity markets started the decade with a downturn, as the technology stock bubble burst and many equity market values tumbled. That negative trend would continue into 2002. However, 2003 saw big changes in equity values as both developed and developing countries soared up from the depths of the bear market.
The positive trend would continue throughout most of the rest of the decade, until the effects of the global financial crisis began to build investor fears in 2008.
Most countries in the S&P Indices experienced a serious negative impact on stock markets in 2008 as the effect of the global financial crisis took hold. In fact, the only country that did not have an overall decline in stock market values in 2008 was Bangladesh, which saw a 4.3% rise in stock market values that year, followed by a 39% rise in 2009.
Clearly stock markets in developed economies were harder-hit by the crisis than were emerging economies. The S&P Broad Market Index (BMI) for Developed Markets showed a -7.3% annualized return over the previous three years—as of December 31, 2009—in comparison to a +4.2% three-year performance figure for the S&P Emerging Markets BMI.
It is important to note the impact of exchange rate fluctuations on stock price volatility. Although exchange rate fluctuations are generally only a small fraction of stock market volatility, they do have an effect. And as volatility increases in exchange rates, so too does the impact that it has on stock markets. As a result, while the financial crisis of 2008 developed, the highly-volatile US dollar accounted for a substantial portion of equity market volatility around the world.
Although most developed and emerging markets did see stock markets rise again in 2009, a number of frontier markets continued to see declines—including Bahrain, Ghana, Jordan, Morocco, Nigeria, and Trinidad & Tobago.
Those developed or emerging markets that saw the greatest rebound in 2009 include Brazil—which went from a 57.3% decline in 2008 to a 125.1% increase in 2009—Indonesia—from a 62.3% decline to a 130.1% increase—the Russian Federation-going from a 49.8% decline to a 118% increase—Norway—from a 66.1% decline in 2008 to a 91.4% increase in 2009.
China went from a 53.2% decline in 2008 to a 66.3% increase in 2009, while the US went from a 38.7% decline to grow 26.1% in 2009 and the UK went from a 50.9% decline to a 39.6% increase.
It was the emerging markets that truly led the stock market recovery in 2009, with the Emerging Markets BMI showing an annualized performance of +80.3% over the year. That compares to the Developed Markets BMI, with a +29.6% annualized return in 2009. S&P Equity Indices (% change)
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Data is from the S&P Global Equity Indices, 2000-2009. Source: Standard & Poor's
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