In 2011, global markets gyrated violently up and down based upon the news of the day.  That being said, overall U.S. stock markets have been relatively insulated compared to the rest of the world. 

Year-to-date, as of the market close yesterday, the combined average of the Dow Jones Industrials, S&P 500 and NASDAQ was down 1.933%.  This compares quite favorably to the Dow Jones Global Index, which is comprised of 50 countries (including the U.S), being down 12.90%, and the Dow Jones Global Index-ex U.S. (excluding the U.S.) down 18.9%, for the same time period. 

Another example of how the U.S. is not experiencing the same market traumas as other countries would be yesterday’s bond auctions.  The five-year Italian government bonds were issued at 6.47%, while 30-year U.S. government bonds were issued at 2.89%.  To put this into perspective, a 30-year $150,000 mortgage at the previously mentioned Italian bond rate would result in a monthly payment of $945.10 versus $623.50 at the U.S. rate.  Now you can see why high interest rates are crushing European governments’ finances, especially when they have to refinance hundreds of billions, if not trillions of debt each year.

To say that we in the U.S. have been sheltered from what is occurring in other parts of the world is an understatement.  Also, it is an omen of what fiscal steps we need to take here in the U.S. to avoid the same predicament.  Read more

A couple of economic developments this week helped global stock markets end November on a good note, and here in the U.S., we had the largest gain since March 2009. 

• Central banks around the globe announced a coordinated plan to make dollar funding cheaper for European banks (i.e., they are giving European banks much needed liquidity and at a very reduced rate).
• There were separate reports this regarding the unemployment rate in the U.S., which indicated it may be declining.  This is great news; however, part of this decline is due to fewer people looking for jobs (i.e., they have just given up).
• In addition, the European Central Bank and our Federal Reserve have both pledged additional steps if needed to stabilize world financial markets.  Many here in the U.S. are predicting the Fed will implement another quantitative easing (i.e.,QE3), which potentially would have a positive impact on the stock market and economy.
• China indicated it would loosen monetary policy by lowering the reserve requirement ratio for banks to boost its slowing economy (i.e., they are putting measures in place to encourage banks to loan money). 

There are two sides to above story 

Various central banks around the globe, including our Federal Reserve, came together to provide liquidity to European banks that are suffering as a result of European Union nations’ debt problems, and the losses they have already incurred or will be taking from various EU nations defaulting on a portion of their debts. Read more