RECENT THEORY ON GLOBAL DECOUPLING IS A MYTH -- FOREIGN MARKETS ARE FALLING ALONG WITH THE US -- I'LL BE SPEAKING IN EUROPE NEXT WEEK

SO MUCH FOR GLOBAL DECOUPLING ... I've expressed reservations before about the recent theory of global decoupling. The reasoning was that foreign markets would remain relatively immune to a major selloff (and possible recession) in the U.S. That view struck me as strange, especially with the close correlation that's existed between global markets over the past decade. Which is why Chart 1 shouldn't come as a surprise to anyone. It shows a sampling of the world's major developed stock markets over the last year. And, not surprisingly, each and every one of them started to fall in November along with the U.S. market. Most haven fallen as far as far as the U.S., but they are falling. The only ones still in the black for the last year are Hong Kong (+26%), Germany (+12%), and Australia (+2%). The biggest yearly losers are France (-7%), Britain (-5%), and Canada (-2%). By comparison, the S&P 500 lost -6.5%.

Chart 1

GLOBAL LOSSES SINCE NOVEMBER... The bigger question is what's happened since the start of last November when the U.S. market started to drop. Since then, the S&P 500 has lost -14.6% through Thursday. During that same time span Hong Kong lost -19%, Australia -14%, Canada -13%, Britain -12%, France -11%, and Germany -7%. It's interesting that two of the last year's best performers (Hong Kong and Australia) were the biggest losers since November. Outside of Germany (which was the smallest loser), the losses in the other five developed markets averaged -13.8% which is just a touch smaller than the S&P 500 loss of -14.6%.

Chart 2

EUROPE IS FALLING ... The charts of Europe's three biggest markets look remarkably similar to that of the U.S. France's looks even worse. Chart 3 shows the French CAC 40 tumbling to a new 52-week low. Britain isn't much better. Chart 4 shows Britain's FTSE bearing down on its August intra-day low at 5821. The German DAX has been the strongest of the three. But it too has started to drop. Chart 5 shows the DAX ending the week at the lowest level since August. All three are trading well below their 200-day moving averages which puts them in major downtrends.

Chart 3

Chart 4

Chart 5

HEADING TO EUROPE... The reason I chose to focus on the European markets is because I'm heading there over the weekend. I'll be speaking at the International Investors Conference in Zurich, Switzerland on Tuesday and again in Munich, Germany on Thursday. My main assignment there is to talk about the U.S. markets. I'll be showing many of the same charts I've been showing you here. Unfortunately, they're not very encouraging. Another point I'll make is that foreign markets may not fall as far as the U.S., but they will suffer along with us. The world's markets and economies are too closely correlated for that not to happen. And, as the above charts show, foreign markets are definitely falling. Does anybody know the French and German words for "bear"?