Asymmetry in Global Markets

Some argue that we understate the significance of the Asian crisis. So, here are three graphs of equity market correlations in moments of rather severe crisis. The unit in each is 12 month percent change.

1. Black Monday, October 1987. Biggest Single Day Correction in US History. Notice that the FTSE and Hang Seng follow the US down. Notice the correlation 10 years prior to the 1997 Asian crisis.

2. The Asian Crisis, 1997. Notice the separation. Hong Kong falls sharply. The US and UK give back a few gains but then recover very quickly. No banks failed in the US as a result of this crisis. And I note that this Asian crisis was probably the most severe to occur prior to 2008. And yet

3. US Subprime, 2007-09. The rest of the world follows the US down.

So, is Greece more like Thailand, or is Greece more like the United States? We think Greece is more like Thailand.