We haven’t seen this analysis anywhere else, but it’s looking increasingly like global markets outside of the U.S. rolled over into a bear market last April, and that their rally off the October low was only a bear market rally within an ongoing bear market.
We’ve been saying we expect only another correction sometime this summer, but not the next global bear market until 2013 and 2014. And the U.S. market recovered from last summer’s correction and has gone on to nominal new highs.
But the FT World Index Ex-USA plunged 22% last summer, exceeding the official 20% decline that defines a bear market. And the rally off the October low only partially retraced that decline before rolling over to the downside again in what could be the beginning of a typical 2nd leg down.
Global markets outside the U.S. have been correctly fearing for over a year now that the eurozone debt crisis, austerity programs, slowing economies, and actual recessions in Europe, were a threat to global economies.
Will U.S. Follow Europe’s Lead in Solving Its Debt Problem?
Luka Katseli, former economy minister of Greece, says, “The euro-zone’s debt program is suicidal, not only for Greece, but for Spain, Portugal, Italy, everywhere. The mistake is being made.”
She is referring to the EU’s German-led year-long insistence that governments tackle their debt and deficits problems by immediately cutting government spending in the midst of slowing economies and even recessions.
Demands for similar cuts and austerity actions to curb its record government debt are being made in the U.S.
Fed Chairman Bernanke has warned Congress several times in the last two years that it needs to have a plan for tackling the debt problems, but the plan shouldn’t be implemented while the economic recovery is still anemic.
In making his points a year ago he said he thought Europe was making a mistake by tackling its debt problems too soon with austerity programs, that it could potentially drop their economies back into recessions, requiring more spending and exacerbating their problems. Seems like he was right.
To read my weekend newspaper column ‘Europe Is a Bigger Problem Than the Slowing U.S. Economy’ Click here.
Images: Flickr (licence attribution)
About The Author
Sy Harding publishes the financial website www.StreetSmartReport.com and a free daily Internet blog at www.SyHardingblog.com. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!