Gloom has been a Global Phenomenon

Investors have seen their fair share of doom and gloom in U.S. stocks during the first quarter of 2008 as our financial crisis continues to unfold.  In addition, the dollar continues its downward slide against major currencies around the world.  However, against common wisdom, foreign stocks have actually crashed much harder than U.S. stocks so far in 2008.  Why?

Two reasons.  First, the market is coming to the rightful conclusion that the health of economies in Europe and Asia are inextricably tied to the health of our economy.  Investors who had bought foreign stocks as a “safe haven” are now seeing foreign economies as not much safer.  Second, it was fast money from “momentum” investors in the U.S. that had led the charge into foreign stocks.  These “investors” tend to shoot first and ask questions later, which exaggerates any movement in stocks.  Following is a list of the biggest developed and emerging markets in the world, showing how well their stocks did in the first quarter:

Stock market performance in first quarter

     
Developed    
U.S. -9.9%  
Germany -19.0%  
France -16.2%  
U.K. -11.7%  
Japan -18.2%  
Australia -15.7%  
     
Emerging    
China -34.0%  
Turkey -29.8%  
Greece -23.0%  
India -22.9%  

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