Revisiting March lows

March 9, 2010

No, not in the way you think. Tuesday marked the one-year anniversary of world stocks hitting what appears to be their post-financial crisis low. The index was the MSCI all-country world index. The low was hit on March 9, 2009.

At the time, many investors reckoned their world was collapsing. Stocks had fallen close to 60 percent in a little more than 16 months. But the low proved to be the start of a remarkable rally that brought the index back up 80 percent until January this year.

All is not well on equity markets at the moment, given worries about European debt, the end of special central bank liquidity programmes and questions about the sustainability of the U.S. economic recovery.  The MSCI index seems to be having a hard time staying in positive territory this year.

And there are also investors such as Crispin Odey of hedge fund Odey Asset Management who have started worrying about whether the market will regress to its  lows. He recently told his clients in a note:

“Having hoped that March of last year might have proved to be the long term bottom for the developed markets, I am now much less sure.”

For now, though the lows remain a year past and the MSCI index is around 73 percent higher than it was then.  Happy Anniversary.

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The massive rally in the stock market seems to be a gigantic ‘hail Mary’ pass where investors pumping in their billions ‘believe’ one way or another that things will get better.

The market was very low, it seemed to have stopped the decline. Let us forget the economic of it all and just jump in. Which they did and with the suspicion the Govt was pumping in billions as well to help create the appearance of a resurgent market.

But analysts and investors failed to look at the condition of their patient. The standard recovery wasn’t and wont happen because their patient is still on life support and looking for organ donors.

Blind faith has trumped economic analysis and gives us a stock market as much 40% over valued. Do they really think the NASDAQ is worth boom time 2006 prices? And on its way back to the debt fueled super boom of 2007 when prices and optimism were at their highest? It is insanity.

WE still don’t even have positive employment growth! The stronger dollar puts a knife into export market that showed the slightest glimmer.

The US investor are like a bunch of penguins on an island of ice that is melting surrounded by Leopard seals. They will only know the danger when forced to face reality and the ice melted.

And there be no help on the horizon. China is beginning to wind back now, the UK has just discovered that it wont be having an export recovery and look forward to increasing debt and deficit; the EU is still struggling to achieve growth and control its sicker members.

The current market has no relationship with the real world. They threw their ‘hail Mary’ pass and hope somebody will catch it.

Posted by Kina | Report as abusive