Data on market tops and bottoms for over 100 world markets is available through our Events-in-Time tool, and the summary numbers for global tops and bottoms are available through our GFD Indices. By our count, there were 47 market bottoms in 2016 and only 2 market tops, giving a net score of -45. This was the lowest score global markets had seen since 2009 which had a score of -53. It didn’t take artificial intelligence to figure out that 2017 was going to be a banner year. 2017 was a year in which all markets moved upward in sync. There wasn’t a single major market in the world that hit a bottom. The S&P 500 was up 19.4%, MSCI’s EAFE index was up 21.8% and MSCI’s Emerging Markets were up 34.3%, and that was before dividends! 2017 was one of the best years in the 21st Century. Part of the problem from American investors’ perspective was that even though many European and Asian markets hit a bottom in 2016, the United States did not since it has been a global market leader since the Great Recession of 2009. US markets did sell off in August 2015 when Brexit was approved by the British electorate, but the market put in a double bottom in January 2016, and the trend has generally been straight up since then. In 2017, five markets hit a bottom and three markets hit a top. None of the markets hitting a top or bottom was a major world markets. The five hitting tops were Bosnia-Herzegovina, Côte d’Ivoire, Nepal, Qatar and Tanzania. The three hitting market tops were Iraq, Mongolia and Pakistan. Only 2018 will tell whether these nine markets bounce back. And the forecast for 2018? High numbers of markets hitting bottoms exceeding the number of markets hitting tops only happens every five to seven years. During this century, this occurred in 2003, 2009 and 2016, so this data generally portends positively for global markets for the rest of the decade. 2018 will probably be more volatile than 2017, but there is little reason to believe that 2018 and 2019 won’t be a great time for investors worldwide. Our advice, ignore volatility and stay in the market for 2018. We’ll let you know how our prediction went in a year.

Many of the French have an aversion to capitalism, and the past performance of stocks in France easily explains why. The contrast between historical returns to investors in France and the United States have about as much in common as the four French candidates. Over the past 150 years, French investors have received some of the worst returns of any country on the planet. We have put together total return numbers for stocks, bond and bills using data from David Le Blis, who extended returns for the CAC-40 index back to 1854 for stocks, and Global Financial Data for bonds and bills. We have taken the French returns, converted them into US Dollars, and then adjusted for inflation. Data for the S&P 500 in the United States is available back to 1871. The table below compares 145 years of returns to stocks, bonds and bills in France and the United States.  

Real Returns in USD in France and the United States, 1871-2016

Country	Stocks	Bonds	Bills
France	0.53	-0.02	-1.50
United States	6.37	2.22	0.60

If someone had invested $1 in France in 1871 and brought the money back to the United States in 2016, after inflation they would have had $2.14 if they had invested in stocks, $0.97 if they invested in bonds and $0.11 if left their money in bills. By contrast, if the money had been invested in America, they would have ended up with $7,758 from an investment in stocks, $24.12 from bonds and $4.30 from bills. If you think France’s poor returns are not one cause of the country’s left-leaning economic policies, you’re only fooling yourself.  

Two Turning Points

To illustrate the impact that French elections and government policy have had on French investors, we can look at two events: the election of the socialist Léon Blum on May 3, 1936 and the “tournant de la rigueur” (austerity turn) instituted by François Mitterand in March 1983. Léon Blum led the Popular Front to victory in the French elections of 1936, which led to a series of leftist reforms that transformed the French economy. World War II began in 1939 and inflation reigned in France both during and after the war. The result was a disaster for French investors. Adjusting for inflation, 1 Franc invested on January 1, 1936 in French stocks, bonds and bills would have produced horrible losses over the next 15 years. After inflation, one franc invested in stocks in 1936 was worth 4.37 centimes in 1951, one franc invested in bonds was worth 3.88 centimes and one franc invested in bills was worth 3.26 centimes. In other words, no matter where you invested your money in France, you would have lost over 95% of your investment after inflation between 1936 and 1951. Although things improved after 1951 as France enjoyed its post-war growth, investors still received relatively lousy returns. In the 100 years before Mitterand introduced his austerity plan in 1983, French investors lost money no matter where they invested their funds. If investors had put 1 Franc in stocks, bonds and bills in 1882, 100 years later they would have been in tears. One franc invested in French stocks in 1882 left investors with 6.65 centimes after inflation 100 years later. If they had put their money in bonds, they would have ended up with 5.59 centimes and in bills 4.11 centimes after inflation. Over a 100-year period, French investors would have lost over 90% of their money after inflation no matter how they invested their money. Contrast this with the returns to American investors between 1882 and 1982. If American investors had put $1 in stocks in 1882, after inflation they would have ended up with $208 by 1982, $2.73 if $1 had been put in bonds and $1.18 if $1 had been put in bills. The graph below illustrates total returns to French investors in US Dollars after inflation. Given the miserable performance of French investments, it is no wonder that the French are often the strongest critics of capitalism in the world. It should come as no surprise that Capital in the Twenty-First Century was written by Thomas Piketty from France. If investors in the rest of the world had suffered the lousy returns of the French, it would be a miracle if capitalism was left in any country. During the past 100 years, French economic policy has been disastrous for investors. But the fact of the matter is that in the past, the French electorate has elected leaders who showed little concern for investors, and they suffered as a result. The 2017 elections offer voters candidates who clearly differ in their economic policies. Let’s hope the French electorate understands that their choices do have consequences, and vote accordingly.

Global Financial Data has added 320 Total Return Series to its GFD Indices. These series cover over 50 countries and include returns to stocks, bonds and bills. These indices use data already available in the total return series that are available through the GFDatabase. The indices are available both as nominal and inflation-adjusted series.These series differ from the GFDatabase indices because they have all been converted into United States Dollars and all have a common base of 12/31/1999 = 1000. This allows users to directly compare the returns to stocks bonds and bills from all major markets in the world. These total return series have more history than is available from any other vendor. A naming convention has been used to make access easier. Each series begins with “GFT” then add B for the Bond index, “C” for the Cash Index or “S” for the stock index, then add the ISO code for each country, then M for the nominal index and R for the Real Index. So the Hong Kong nominal stock exchange index is GFTSHKGM and the Canadian Real Bill Index is GFTCCANR.The GFD Total Return Indices complement the GFD Indices that are already available. The GFD Indices include several hundred series covering bonds, commodities, stocks and real estate. With the addition of these series, the GFD Indices include over 500 series. To get more information on these indices, call today to speak to one of our sales representatives at 877-DATA-999 or 949-542-4200.