The most important driver of stock market returns

Too much cheap debt over-inflated global asset prices. Even after the sell-off, returns on many are likely to be poor. But Asia is looking forwards with optimism, and here, Cris Sholto Heaton explains the principal driver behind stock market returns.

Everything is bigger in America. When Lehman Brothers filed for bankruptcy in September it reported $639bn in assets and debts of $613bn making it by a long way the biggest corporate failure in history. Overall, eight of the ten largest collapses on record have been US firms. (The other two were Japanese financials - Hokkaido Takushoku and Yamaichi Securities during the 1997 crisis.)

But Lehman was exceptional, even for the US. Before September, America's biggest investment banking collapse was junk bond pioneer Drexel Burnham Lambert in 1990. It headed to its grave with $3.6bn in assets and $3bn in liabilities on its balance sheet a mere $5.8bn and $4.9bn in today's money.

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China (CSI 300)2,140-8.7%
Hong Kong (Hang Seng)12,812+0.9%
India (Sensex)8,892+0.6%
Indonesia (JCI)1,285-0.9%
Japan (Topix)757+2.3%
Malaysia (KLCI)891+0.1%
Philippines (PSEi)1,872-0.5%
Singapore (Straits Times)1,5950%
South Korea (KOSPI)1,063-0.3%
Taiwan (Taiex)4,557+2.7%
Thailand (SET)432-0.7%
Vietnam (VN Index)246-2.7%
MSCI Asia69-1.0%
MSCI Asia ex-Japan254-0.6%
Cris Sholto Heaton

Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.