I previously saw a blog by the Investing Engineer PH last week about interest rates affecting the stock market (http://investingengineer.com/interest-rates-affect-the-stock-market/)
*open the link in a new tab*
Interestingly, I wondered and checked how stock markets had reacted from these low-low rates for the past decade.
Let me define what that data are included in the graph on top and why I put it there.
S&P500: According to Wikipedia, the S&P 500, or the Standard & Poor’s 500, is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ.
Philippine Composite (PCOMP): consists of 30 companies in the Philippines, mainly indicates how investors are appreciative of these companies (up), or resentful (down) over a period of time. If you want to know which companies are in the list, open this link in a new window (http://www.pse.com.ph/stockMarket/marketInfo-marketActivity.html?tab=1)
Dow Jones (DJIA): According to Investopedia, the Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq.
Fed Funds rate (FFR): We have discussed this in part 1 of this blog series. See (https://perennialinvesting.wordpress.com/2015/10/03/which-company-shares-stock-i-should-buy-now-that-the-fed-kept-rates-unchanged/).
Why I put it there?
It’s not that very distant when we had the Great Recession of the 2008. This is when the Federal Reserve Board of Governors through the Federal Open Market Committee (FOMC) initiated the Quantitative Easing and further lowering down of the FFR.
In the graph, there appears to be this slightly observable, through ocular inspection, an inflection point somewhere during that year. The listed stock market exchanges also appreciated from that time period until the present.
What I speculate on these historical performances is ‘somehow’ I assume that these exchanges may be affected when the Fed finally hikes its interest.
How much affectation? I don’t know
When will Fed hike rates? I don’t know
To what extent? I don’t know
It is also important to note that historical performance does not predict the future.
Adding other countries’ exchanges to the mix emphasizes the inflection point I am talking about.
S&P BSE SENSEX (S&P Bombay Stock Exchange Sensitive Index, BSE 30, or SENSEX): According to Wikipedia, is a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on Bombay Stock Exchange.
Hang Seng Index (abbreviated: HSI, Chinese: 恒生指數): According to the same source, is a freefloat-adjusted market capitalization-weighted stock market index in Hong Kong. It is used to record and monitor daily changes of the largest companies of the Hong Kong stock market and is the main indicator of the overall market performance in Hong Kong.
Shanghai Stock Exchange Composite Index (SSE Composite Index, Chinese: 上海证券交易所综合股价指; abbreviated 上证综指): is a stock market index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange.
This aforementioned part of the article is purely a speculation.
Interestingly, according to the S&P Dow Jones Indices, as of August 31, 2015, the % CUMULATIVE TOTAL RETURNS BY COUNTRY from Year to date are as follows:
Disclosure: I would not receive any compensation for doing this article. I am not a professional financial analyst. This is just a hobby. Lastly, my work is not error-free, but I strive for it to be. Do not consider as a buy or sell advice. Invest at your own risk.
If you are interested in this similar approach to investing and would seek updates, I wish to invite you to this Facebook group SEEKING VALUE (https://www.facebook.com/groups/SeekingValue/?ref=bookmarks)
If you want to view the previous and other posts, you may want to open these links in new tabs
Part 1: Which Company Shares I Should Buy, Now that the Fed Kept Rates Unchanged?
Part 3: In the Philippines, Which Company has a Good Recent Performance of Handing out Dividends.
Part 4: In Hong Kong, Which Company has a Good Recent Performance of Handing out Dividends.
Part 5: In India, Which Company has a Good Recent Performance of Handing out Dividends.