Gavekal Capital: The Average World Stock Is Already In A Correction

Thursday, October 2, 2014

The Average World Stock Is Already In A Correction

While many commenters noted how the Russel 2000 has now entered into a correction after another weak close yesterday, we thought it is noteworthy to highlight that this weakness isn't just in small-caps like most commenters are implying but it is in large-caps as well.

A correction can be loosely defined as a 10% drop from a recent high. Using this definition, the average stock in the MSCI World Index has now entered into a correction. In the first chart below, we show how far off the average stock in the MSCI World Index is from its 50-day day high. The current reading is 10%.

The average stock in the MSCI North America hasn't quite entered correction territory when looking at its distance from the 50-day high (it is off 8%). However, the average stock in North America is in a correction if we look at how far off it is from its 100-day high.

Corrections can also be found in Europe and Asia as well.The average stock in Europe is 11% off its 50-day high and the average stock in Asia is 10% of its 50-day high.

Finally, if we lengthen our view and see how far off the average stock in Europe is from its 252-day (1-year) high than we are almost in bear market territory for the first time since 2012. The average stock in Europe is 18% off its 252-day high.

About Gavekal Capital

Gavekal Capital is a US registered investment advisory firm that manages the Gavekal Knowledge Leaders Strategy. Knowledge Leaders are a group of the world’s leading innovators with deep reservoirs of intangible capital. These companies often possess competitive advantages such as strong brand, proprietary knowledge or a unique distribution mechanism. Knowledge Leaders are largely service-based and advanced manufacturing businesses, often operating globally. Gavekal Capital seeks to identify the world’s leading knowledge companies through a proprietary process that analyzes corporate knowledge investments.
We offer the Gavekal Knowledge Leaders Strategy in multiple products for global investors. For more information about our product offerings please visit http://www.gavekalcapital.com.
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