To say that the last two years have been tumultuous for the global stock market would be an understatement. While the signs of major troubles were showing throughout 2008, it was the Lehman collapse on September 12, 2008, the world’s biggest bankruptcy, that stopped financial markets in their tracks and triggered a major selloff.
As the world responded to the crisis, what became even more evident was the dramatic divergence between developing and developed markets. Not only was growth restored faster in the major developing markets, their stock market performance has also been better. Among the major developed markets only a couple have returned to pre-Lehman levels or exceeded them. The S&P 500, for example, still needs to rally more than 10 percent to reach the pre-Lehman levels; Japan’s Nikkei 225 is still more than 15 percent behind those levels.
As one might expect, emerging markets showed more volatility. Although the riskier emerging markets fell more during the height of the financial crisis, their subsequent rebound was much sharper than that of mature economies, and took many of them above pre-Lehman levels.
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