Brazil's BOVESPA and Other World Markets Hanging on Bailout Vote

Few words can describe the global economic turmoil of Monday, September 29th. Even for those who have lived through a number of economic crises, the rejection of the US bailout and the international plummet of dozens of world exchanges can easily compete as one of the worst in recent history.

An article entitled: "Global Markets Suffer Worst Day in 38 Years" by Financialpost.com leads with a picture of two BOVESPA traders looking ashen as they watch the ticker boards, and cites how the market fell by 9.4% on Monday (it also cites Hong Kong's Hang Seng dropping 4.3% and London's FTSE falling 5.3%).

Another grimly titled article: "Overview: Fear Grips Global Markets" at FT.com, cites the same widespread turmoil, only briefly mentioning the fact that the BOVESPA trading was suspended, a fact that would normally have made global headlines alone. In fact, looking at Emerginvest's global heat map at the end of Monday, you were hard pressed to find any developed country in the green (Saudi Arabia was up approximately 6% which was the only one above 2.0%). Only a handful of emerging and frontier economies were positive, including Egypt and Uganda - up less than 1.0%, but up nonetheless.

Of course, with the Senate scheduling a vote on Wednesday for a revised version of the House-defeated bailout package, world markets soared once again on Tuesday. An article from Reuters: "Brazil stocks, currency rebound from historic rout" describes how the BOVESPA soared 7.63% with the news.

This kind of gargantuan pendulum swinging of world markets must get under control however. Aside from the worldwide impact on investors' blood pressure, it is demonstrating how risky even major market economies like the US, Germany, and Japan are.

I would also like to point out that while many investors hold the belief that the less developed an economy is, the more risky it is (frontier markets come to mind), many of the frontier markets had relatively small losses. According to Emerginvest, Argentina was only down 0.9%, Nigeria was down 0.5%, to name only two. If anything, this stresses to me the importance of diversification, as well as a horrific reminder that developed markets can be just as risky as emerging or frontier.

In summation, it seems like Brazil's BOVESPA, and virtually all of the other major world economies hang in the balance with the US Senate vote tonight on the revised bailout plan. I won't inject my own personal leanings on the matter, however it is clear that no matter what side of the argument you are on – it is certainly one of the most important financial decisions the world has seen in recent history.

Disclosure Statement: Emerginvest is a international finance portal, helping investors find investments from around the world. Emerginvest attempts to provide non-partisan information about world stock markets, and does not have any holdings in foreign equities.