Negative territory
For the first time in five years the stock index prepared by this writer has ended the year in negative territory. A stock index is a manifestation of what investors in the market think would happen to the earnings of companies. For those who study the stock market, the index also serves as a measure of the likely risks associated with those companies. The stock market recorded very good returns in most of the years which are tracked in the Lucas Stock Index (LSI) prepared by this writer. From 2010, the year when the index started, the performance of the market was very robust on the steady appreciation in the price of the stocks that are part of the index. The value of the index rose 16 per cent in 2010. The index continued to rise in 2011 where it gained 28 per cent. The index had equally good years in 2012 and 2013 where many of the stocks continued their positive movement in price. As a result, the index rose 41 per cent in 2012 and 30 per cent in 2013. Last year, however, the index lost nearly seven per cent of the value that it started with. The economic situation could be bad news for the government which might try its best not to reveal it to voters.
Direction
Additionally, the stock index of a country is one of many tools that is used to indicate the direction in which the economy of a country is heading. The companies in the LSI represent over 20 per cent of the market. Since the LSI is market weighted, the decline in value suggests that the overall direction of company profits in 2014 might not be as good as last year. Further, it could be an indication that the overall economy itself might not have done as well as in previous years. The prospects for 2015 might not be good either, though the fall in oil prices could be a wild card in the game. On the one hand, the lower prices could spur both domestic investment and consumption spending while, on the other, it could lead to a scaling down of foreign investment in oil exploration. Unless oil prices remain at their surprisingly low level, Guyanese could