GLOBAL - Stock market losses total US$13trn since 2000, or US$2,000 for every man, woman, and child on the planet, a new research report has shown.
ABN Amro’s Global Investment Returns Yearbook, a study of long-term investment returns by Elroy Dimson, Paul Marsh and Mike Staunton from London Business School, shows equities have fallen 50% from their December 1999 high and created the longest bear market since the Second World War.
However, in terms of losses, it is only the third worst bear market on record after the 1929-1932 Wall Street Crash (where US investors lost 80% in real terms) and the 1973-1974 bear market (where UK equities markets fell 71% in real terms).
The chart to the right compares the UK’s performance with that of the US, Japan, and Germany across 2002. The chart shows that the return on US equities was –21%, and that while the UK market tracked Wall Street closely, it underperformed slightly in 2002. Germany was the worst performer among the world’s major markets, reflecting its weak economy, and the exposure of the German market to banking and insurance stocks.
While Japanese equities made a strong start in 2002, they still ended the year 17% down. In stark contrast to other global markets the real value of Japanese equities (even with dividends reinvested) has now fallen by over 70% since the end of 1989.
Though it is now hard to believe, the Japanese market was once larger than that of the US. At the end of 1988, Japanese equities then made up 40% of the world total, compared with 29% for the US. The report also reveals that France is today the world’s fourth largest market with 3.9% of world capitalisation, while Switzerland (3%) ranks fifth, having pushed Germany (2.5%) into sixth place.
In contrast with equity markets, the favourable performance of bond markets was significant during recent years. The real return on long government bonds was positive in 22 of 24 countries, with negative returns occurring only in the smaller markets in Mexico and Malaysia.
The best performing bond market was the US, with a real return of 15.1%, followed by Switzerland, with a real return of 12.7%. Most other countries with sizeable bond markets gave real returns in the range of 7-11%.
The study also found that 2002 was the third year running in which value investing has dramatically outperformed growth investing.
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