By Haddon Libby
Globally, publicly traded companies had about $110 trillion in market value in June. Over the last three months $11 trillion of this value was wiped out – the worst performance for stock markets in four years. According to the SIX Group, a financial information company based in Zurich, stocks declined globally by 10.7% for the quarter and 10.2% for the year.
Generally speaking, the U.S. stocks were down approximately 7.5% for the quarter causing most stock market indexes to be in the red for the year.
Looking at fifty major U.S. stock market indexes, only four ended the quarter in positive territory: the Chicago Board Options Exchange Volatility Index at 34.4%, the Dow Jones Internet at 7.1%, Dow Jones Utilities at 4.8% and the NASDAQ Insurance at 0.8%. That’s it.
The worst performers were the Gold/Silver Index at -26.8%, Oil at -20.7%, Energy at -19.5% and Biotech at -18.2%.
A more generic look at U.S. stocks showed that the S&P 500 (500 largest companies in the U.S. terms of market value) was down 6.9% for the quarter and 6.7% for the year. The S&P MidCap 400 (400 companies with a market values between $750 million and $3.3 billion) was lower by 8.9% and 5.8% for the year while the S&P SmallCap 600 (600 companies between $400 million and $1.8 billion) was off 9.6% for the quarter and 6.5% for the year. The Dow Jones MicroCap index which tracks all publicly traded companies that are not amongst the 2,500 largest companies dropped 12.6% for the quarter and 9.1% for the year.
Looking across the Atlantic Ocean, the Europe Dow was down 10.7% for the quarter. Only one country index was positive for the quarter: Ireland at 0.04%. The weakest were Greece at -18.0%, Russia -16.0%, Spain -11.2%, Netherlands -10.9% and Turkey -9.8%. Overall, the top 50 European companies in terms of market value were down 9.4%.
Looking across the Pacific Ocean, Asia had a miserable quarter, down 17.7% with their largest companies off 16.9%. Only Sri Lanka posted positive results, up 0.4% (down 3.4% for the year). Chinese stock market indexes were down on average 29% for the quarter following a speculative furor for their markets in recent years. Other developed Asian economies struggled with China’s Hong Kong down 20.6%, Singapore 15.9%, Japan 14.1% and Indonesia 14.0%.
Neighboring Australia was lower by 8.0% as weak commodity prices threw their economy into a slowdown.
To our south, Argentina was down 15.8% with Brazil at 15.1% with no Central or South American indexes in the black for the quarter.
To our north, Canada was down 8.6% due in large part to lower energy prices.
Emerging markets have had not only a rough quarter but a terrible year. Thirty countries are designated as an emerging market with the nine largest being China, India, Brazil, Russia, South Korea, Mexico, Indonesia, Turkey and Saudi Arabia. Some of the smaller countries include the Philippines, Egypt, Peru and Thailand.
For the first time since 1988, more capital will leave these countries than is being invested. The Institute for International Finance reported that inflows of capital for these countries will total approximately $540 billion – $8 billion below outflows. Including stock market declines and local investors investing outside of their countries, 2015 is positioned to be the worst year for these countries since the 2008 financial crisis.
Generally speaking, the slowdown of the Chinese economy and their currency devaluation are having a domino effect around the globe. When you add lower commodity prices, these countries are looking at significant economic slowdowns.
With this global slowdown impact the US economy? Most certainly! Then again…since two-thirds of our economy is reliant on the US consumer, lower commodity prices and cheap Chinese products should have a positive impact that could serve to insulate our economy.
Haddon Libby is Managing Director of Winslow Drake, an investment management practice focused on individuals and 401(k) plans. He can be reached at hlibby@winslowdrake.com.
