Standard & Poor's Says World's Developed and Emerging Markets Fell in August

Leading and deeply respected financial market intelligence firm Standard & Poor's announced on Tuesday that the world's emerging and developed equity markets posted negative returns for the month of August. Emerging markets returns fell off 1.94% while developed markets returns declined by 0.36%. However, both emerging and developed markets continue to maintain positive returns for the 12-month period which ended in August of 2007, yielding returns of 46.60% and 17.94% respectively.

"World equity markets were rattled by concern over liquidity in August, as the anxiety over the U.S. housing market proved that all markets are connected. In addition, volatility returned in August with the S&P 500 posting changes of at least 1% for 12 of its 23 trading days -- a rate not seen since 2002," says Howard Silverblatt, Senior Index Analyst at Standard & Poor's.

In the wake of the S&P report alluding to the growingly entangled web engendering the global marketplace, Federal Reserve Chairman Ben S. Bernanke on Tuesday said that the "global saving glut" is the main factor that is still helping to keep interest rates low in the United States. Bernanke also indicated that those rates are likely to not rise very much in the event that the pool of excess capital, or liquidity, diminishes over the coming decades.

Economic theory holds that yields on bonds (adjusted for inflation) are supposed to rise as saving, which increases liquidity, diminishes.

International investors are holding close to half of all Treasuries outstanding, whereas they were hold just over one-third of them at the start of 2001. Since that time, nations with rapidly emerging and expanding economies such as China and Brazil invested the proceeds they enjoyed from increasing trade surpluses.
The benchmark 10-year U.S. note yields have returned and average of 4.37 percent over the past five years, and were yielding 4.33% in Tuesday trading. Their average yield in the decade of the 1990s was 6.82 %.