Stock Markets in US Hold Their Own in the World
MAKING comparisons of stock prices in markets around the world can be a tricky business. In spite of recent reports about the good performance of markets outside the United States, recent statistics from the Commerce Department suggest that the performance of US stocks in 1987-88 was fairly representative of what happened elsewhere.
Italy's common stock price index - at around 580 this week, compared with Japan's 2,470 - has on a percentage basis risen at a considerably faster rate than Japan's since 1978, according to Commerce's Business Conditions Digest.
In the US, the drop in stock prices in late 1987 was greater than in Japan, but it was less than in France, West Germany, Britain, and Italy, and about the same as in Canada.
However, the comeback in the US in 1988 was less than in France, West Germany, Japan, and Italy, but about the same as that of Britain and Canada.
Everywhere but Japan, in fact, the comebacks in 1988 fell short of regaining their 1987 highs. France's comeback came close, but all the others were well short of making a complete comeback.
A standard scale, where all the indexes start at 100 in 1967, shows how differently stock markets have behaved since then. On that scale, the US today is a little above 300, France is about 750, West Germany below 300, Japan a fantastic 2,200, Britain nearly 1,000, Italy 500, and Canada 400.
Speaking of Japan's fantastic 2,200, one can also apply ``fantastic'' to the rise in common stocks in Italy from the end of 1984 through mid-1986. The Italian increase was roughly fourfold in that period, from about 150 to 600.
Since the middle of 1986, Italy and West Germany hit a peak, then pretty much leveled off before plunging in the last half of 1987. The other countries continued upward until their 1987 weaknesses.
For all the attention given to the weaknesses of 1987, described as a collapse, even a crash, stock prices in every country today are far above their levels at the end of the 1981-82 recessions in the various countries. The 1987 corrections erased only a small portion of the gains since that time.
In the US, the magnitude of the 1987 plunge was not much greater than that in 1981-82 and it took place over a much shorter time.
BEFORE you decide to base your investment policy on what has happened to stock prices in the various countries, remember the stock prices indexes are based on each country's own currency. Moreover, the manner in which the stock price indexes are calculated differs from country to country. Nor have we included the stock markets of all the countries in which stocks are traded.
All things considered, stock prices in the US since 1981-82 appear to have held their own with stock prices in other countries.
Leonard Lempert is director of Statistical Indicator Associates in North Egremont, Mass.