Crisis Chartbook

Everybody is asking where to now with the global financial markets. I thought it was worthwhile comparing the current behavior of the financial markets with the two recent crises, namely the great financial crisis of 2008/2009 and the minor one in 2010 when the sovereign debt crisis in the Eurozone developed.

I have charted the series starting with two months before each crisis developed and ended the series 11 months later. The respective series are as follows:

• 2008 crisis: July 2008 to July 2009
• 2010 crisis: February 2010 to February 2011
• 2011 crisis: from May 2011

CBOE S&P 500 Volatility Index

The VIX is following the same trend as in the 2008 crisis. It is likely to rise again before stabilizing.

S&P 500 Index

The trend is similar to that of the 2008 and 2010 crises but milder and in line with 2010. The Index is likely to dip again in November, with a major threat of a deep sell-off in December.

Shiller S&P 500 PE10

The declining trend follows that of the 2010 crisis and is about to stabilize. There is a major threat of a drop in December if 2008’s trend repeats itself.

MSCI Emerging Market Index

The declining trend follows that of the 2008 crisis but is milder. Further weakening is possible over the next two months. (more)