Chart of the Day: S&P versus ASX

Today’s chart is from one of our regular readers The Avid Chartist, who has updated his study of the ASX200 and the S&P500, both denominated in USD. The chart plots the first day of the month from August 2007 through to October 2011.

As Avid says very well:

We Aussies are financially joined at the hip with the US. We’re not the only ones. The global financial system floats atop a sea of US dollar liquidity, which moves up and down not due to any imagined lever pulling by the Fed, other central banks, or governments, but due to fluctuating sentiment among investors and traders.

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  1. So much for decoupling eh.I’d like to see this unadjusted for currency – the ASX seems to have a more extreme end on either side, and I’m wondering if this is amplified by the risk-on/risk-off nature of the AUD. I also assume this correlation goes back further than just the period above.

    • “I’d like to see this unadjusted for currency”

      exactly. what relvance does the ASX in USD have for aussie investors?

      • actually, yesterday was another clear example that princes “firmly coupled” thoery hasnt held water since september last year.

        US up over 1% ASX down 0.3%. we see this every week.

      • You are exactly right GB – well, almost right – it was actually from start of October last year that price magnitude – but not direction – changed.

        Without adjusting for currency, an unhedged Aussie investor who was long from October 2010 to now is outperformed by the unhedged US investor in the same timeframe.

        Now lets look at two new investors from January this year: the Aussie is down 12.6%, the American is flat in their own currencies. Again you are right – but the direction is the same, the magnitude only changing due to AUD volatility.

        But if we fast forward to 2 new investors from July onwards? Same direction, now the magnitude is similar too.

        And then, 2 more investors from the September 2011 low, where it appears the US leads the ASX:

        Completely uncoupled and two different bourses? Or imperfect correlation but one market tied in direction and similar magnitude to the other?

        If you consider the former, may as well ignore the US, since they provide no leads or way of hedging you or your client’s portfolio at all.

        These pics are from my Twitter account.

        • cheers prince, good charts and intersting comparisons. relationship started to go astray around the same time the AUD hit parity, sept, oct last year. i wouldnt be suprised to see this once “firmly coupled” relationship re exert itself. ie the ASX starts to play catch up to the US index and is once again to do with the curency. i dont know whether that means falling US while we stay flat or rising ASX while US stays flat but think its the latter. if we get another couple of intersr rate cuts here you could see the AUD slip back under parity. at the same time the USD could strenghten as we get closer to the end of ZIRP wich is mid 2013. obviously alot of water to pass under the bridge between now and then but something to keep an eye on i reckon

  2. I have a similar chart going back to early 2002 which I’ll post tonight. The USD ASX 200 strongly outperformed the S&P from 2002 through to late 2007, albeit with strong correlation during the various twists and turns along the way. It is only since late 2007 that the two market have been joined at the hip.