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Market Performance Review 1H 2008

From March 2007 to Jun 2008, as shown in Figure 1, there were three market rallies.


1st market rally from 6 March 2007 to 19 Jul 2007, with Dow up by 14.69%, S&P 11.3%. It was predicated on the belief that cheap credit, and the booming stock markets of Asia, would buoy stocks. It collapsed with the credit market (19 Jul 2007-3 Aug 2007), with Dow fell by 5.85%, S7P 500 7.73%.

2nd rally started in 3 August 2007 to 9 Oct 2007 (market top), with Dow up by 7.45%, S&P 500 9.22%. The argument was cheap money would propel markets of, just as rate cuts to avert crises had done in the past. This rally foundered at the turn of the year, under a welter of evidence of a slowing economy in the US. The market was down from 9 Oct 2007 to 10 March 2008 by 19.92% for Dow, 22.7% for S&P 500.

3rd rally started in March 2008 to 19 May 2008, after the fire sale of Bear Sterns, with the Dow up by 10.97%, S&P 500 12.00%. The argument was the same: all the stimulus authorities had administered to avert a financial crisis would push markets ever upwards. The rally collapsed under its own contractions. Cheap money pushed the oil price to unbearable levels. It ended one central banks warned they might raise rates to act against inflation. From 19 May 2008 - 1 Jul 2008, Dow is down 12.63%, S&P 500 9.93%.

As of now, 1 July 2008, the Dow index is down 19.65%, and S&P 500 index 17.9% from the peak dated 9 Oct 2007. A downturn of 15~20% or more in indices is considered an entry into a bear market. We are in the bear market.

Source: and Financial Times 20080702 article by John Authers titled "Hope springs eternal".