Leading share indices continue to drift downwards today as worries mount over inflation, the continuing credit crisis, weak corporate profits, and slowing business activity around the globe.
As we write this, the S&P 500 index is sitting at 1277.94, several points away from its March 10 low of 1273.37, the point at which the index's most recent rally began.
A successful test of the March low and a subsequent rally could help keep the benchmark index aloft for a time, though a breakdown through 1273.37 and a close below that level would likely spell trouble for the index and US stocks as a whole.
We see a similar picture in the chart of the MSCI World index. The MSCI World peaked out in November of '07 and, much like the S&P 500, has drifted downwards since in a pattern of lower highs and lower lows.
What's behind the poor performance, year to date, in global share markets? John Authers of the Financial Times shares his view in today's "Short View" column, "Hope springs eternal".
"The second half of 2008 made a terrible start on Tuesday after one of the worst six months for global stocks in memory. As measured by the MSCI World index, it was the worst first half in 26 years.
Such a fall suggests markets were taken by surprise. But problems for US subprime lenders were obvious at least once a rash of bankruptcies hit the sector in February of last year. The credit market was then at obviously untenable valuations. To foresee that this would damage global stock markets required only logic, not imagination or clairvoyance."
Authers goes on to detail the rationale behind each of the three preceeding "bear market rallies" to date, all of which petered out. He notes that any subsequent rallies will be pulled along by some new hopeful rationale, but that the period ahead is likely to be a rather messy one, as the world's banks attempt to "sort out their own mess".
More on this in Authers' July 1, "Short View" video clip, "A very bad first half of 2008".
Related articles & posts:
"Stock market overview" - Finance Trends Matter.
"Danger: Open Trench" - Frank Barbera via FSO.
"JGBs gain on signs of global economic slowdown" - Bloomberg.
"Record commodity gains mirror equities downturn" - FT.