Substantial gains for stocks in 2009 - so too for unemployment numbers

The stock markets in 2009 were the place to make some nice profits. The FTSE in London rose by 22%, Germany’s Dax by 23% and France’s Cac by 22%.  These gains have been attributed to the recovering global economy.

The global financial system stabilised over this period and it appears a major recession has been averted. Most asset classes felt the effects of concerted effort, co-ordinated across markets, of policy intervention by governments.

US shares also performed well. Despite a last minute drop by 1% on New Year’s Eve on the fears of further instability in the financial markets instigated by a cry for further bailout help for US mortgage lenders, the broad-based S&P 500 index was up nearly 25% on the year.

The Dow Jones gained 20%. The technology-driven Nasdaq index doubled those same gains by rallying to a startling gain of 45%.  Yet, in comparison to China’s gain, these disappear into insignificance.

China’s main stock index rose 80% during the year 2009. Economists predict that the Shanghai index could move higher during 2010 backed by the improving economic recovery, stable policies implemented by a supportive government and continued optimism.

Hong Kong’s Hang Seng index rose by a particularly encouraging 52% while even the slightly more stuttering economy in Japan led to a 19% increase. The Japanese economy is still suffering from deflation in the midst of a fear of a recession.

Most economists fear that these gains are unlikely to be repeated. It is most probable that governments will withdraw economic support and cut stimulus packages.  There are some fears that without these stimulus packages the economies might struggle.

To a certain extent stimulus packages could have masked the underlying problems and falsely created a rosie glow of optimism. On the other hand should the stimulus packages continue, the real problems could very well be covered up for a further year leaving 2011 to be the year where the real pieces are picked up.

Commodities were not left behind. Crude ended the year with an increase of 78% showing off the biggest annual climb in about 10 years. Gold price touched new highs in 2009 hitting a high of just over $1,220.00 an ounce. That worked out at a rise of about 25% for the year.

All in all the year 2009 was a prosperous one for investors.  The same can hardly be said for the man in the street. Headlines proclaiming job losses were never far off the front page of newspapers.

Especially in the US continuous declines in employment opportunities created much financial stress. Unemployed numbers stood at 15.4 million in November 2009 at 10%.  According to the US Bureau of Labour Statistics the rate for adult men stood at 10.5%, adult women at 7.9%.

Population groups suffering the most were teenagers at 26.7% and blacks at 15.6% unemployment. In other words, problems were most stark for those working in the unskilled labour market.

How can this situation be reconciled? The stock markets show a comeback of massive proportion whereas in stark contrast unemployment figures rose to unacceptable levels. What solutions are there?