Investing for Physicians | 1st Quarter Market Review
Quarterly Market Review Q1 First Quarter 2013Advisory Services offered through Larson Financial Group, LLC, a Registered Investment Advisor. Securities offered through Larson Financial Securities, LLC, Member FINRA/SIPC.
Quarterly Market ReviewFirst Quarter 2013This report features world capital market performance Overview:and a timeline of events for the last quarter. It begins witha global overview, then features the returns of stock and Market Summarybond asset classes in the US and international markets. Timeline of EventsThe report also illustrates the performance of globally World Asset Classesdiversified portfolios and features a topic of the quarter. US Stocks International Developed Stocks Emerging Markets Stocks Select Country Performance Real Estate Investment Trusts (REITs) Commodities Fixed Income Global Diversification Quarterly Topic: Betting against the House
Timeline of Events: Quarter in ReviewFirst Quarter 2013 Data show US retail sales increased 1.1% in February, the largest rise since September 2012. FOMC minutes signal debate on Data show US scaling back US central bank’s GDP rose 0.4%Fiscal cliff – bond buying program. in Q4 Haruhiko KurodaUS House of 2012, revised named governor ofRepresentatives US Federal Reserve from prior Euro zone’s Bank of Japan.adopts US Senate’s announces it will estimate of recession deepensbudget bill. continue purchasing 0.1% decrease. as exports from Dow Jones closes at record $40 billion of leading economies Cyprus reaches high of 14,253, topping record mortgage-backed suffer and Q4 GDP €10B rescue set in October 2007. securities and $45 falls 0.6%. deal with billion of Treasury IMF, EU, and World Bank cuts securities each month. ECB. Italy’s election 2013 forecast for ends in global growth from deadlocked 3% to 2.4%. parliament. MSCI All Country World Index12/31/2012 03/29/2013The graph illustrates the MSCI All Country World Index (net div.) daily returns over the quarter. Source: MSCI data copyright MSCI 2012, all rights reserved. The events highlighted are not intended to explain marketmovements. The index is not available for direct investment. Past performance is not a guarantee of future results. 4
International Developed StocksFirst Quarter 2013 Index ReturnsInternational developed equities maintained strong Ranked Returns for the Quarter (%) US Currency Local Currencyperformances, with all major asset classes postingpositive absolute numbers in US dollars for the quarter. 7.24 Small Cap 11.83Consistent with the fourth quarter, the US dollarappreciated relative to most major foreign 6.26 Growthdeveloped currencies. 10.65Across the size and style spectra, small beat 4.70 Large Cap 8.98large and growth outperformed value. 3.13 Value 7.31 World Market Capitalization—International Developed Period Returns (%) * Annualized Asset Class 1 Year 3 Years** 5 Years** 10 Years** Large Cap 10.43 4.78 -0.75 9.95 Small Cap 10.87 7.80 2.05 13.14 Value 10.35 3.57 -1.16 10.28 40% International Growth 10.41 5.92 -0.39 9.53 Developed Market $14.4 trillionPast performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio.Market segment (index representation) as follows: Large Cap (MSCI World ex USA Index), Small Cap (MSCI World ex USA Small Cap Index), Value (MSCI World ex USA Value Index), and Growth (MSCI World ex USAGrowth). All index returns are net of withholding tax on dividends. World Market Cap: Non-US developed market proxies are the respective developed country portions of the MSCI All Country World IMI ex USA Index. Proxiesfor the UK, Canada, and Australia are the relevant subsets of the developed market proxy. MSCI data copyright MSCI 2012, all rights reserved. 7
Emerging Markets StocksFirst Quarter 2013 Index ReturnsMany emerging markets posted negative returns for the Ranked Returns for the Quarter (%) US Currency Local Currencyquarter. There was a significant size premium, withsmall caps outperforming large caps by 5.8%. The 4.20value premium was negative across all size segments. Small Cap 5.81The US dollar appreciated vs. most emerging -0.88 Growthmarkets currencies. 0.26 -1.62 Large Cap -0.49 -2.38 Value -1.28 World Market Capitalization—Emerging Markets Period Returns (%) * Annualized Asset Class 1 Year 3 Years** 5 Years** 10 Years** 12% Emerging Large Cap Small Cap Value 1.96 9.20 -1.08 3.27 3.93 2.43 1.09 4.13 1.58 17.05 18.18 18.47 Markets Growth 5.00 4.09 0.54 15.60 $4.3 trillionPast performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio.Market segment (index representation) as follows: Large Cap (MSCI Emerging Markets Index), Small Cap (MSCI Emerging Markets Small Cap Index), Value (MSCI Emerging Markets Value Index), and Growth (MSCIEmerging Markets Growth Index). All index returns are net of withholding tax on dividends. World Market Cap: Emerging markets proxies are the respective emerging country portions of the MSCI All Country World IMI ex USAIndex. MSCI data copyright MSCI 2012, all rights reserved. 8
Betting against the HouseFirst Quarter 2013 It’s New Year’s Day 2012. In addition to December 31, 2012, all 13 homebuilding firms Investors who insist on waiting for evidence overdosing on televised college football, you’re listed on the New York Stock Exchange of healthy profits before investing are often spending part of the holiday working on the family outperformed the S&P 500 Index by a wide frustrated to find that a firm’s stock price has finances. Armed with a laptop and various online margin, with total returns ranging from 34.1% appreciated dramatically by the time the firm financial tools, you’re on the hunt for appealing for NVR to 382.8% for Hovnanian Enterprises. begins to report cheery financial results. Shares stock market opportunities. To prune the list of The Standard & Poor’s SuperComposite of Hovnanian Enterprises, for example, rose candidates to a manageable size, you decide to Homebuilding Sub-Index rose 84.1% in 2012 580% between October 7, 2011, and December focus on firms that are leaders in their respective compared to 13.4% for the S&P 500 Index. 31, 2012, even though the firm continued to industries and exhibit above-average scores on report losses. Similarly, it is not unusual for a various measures of financial strength. As you The point? For those seeking to outperform the firm’s stock price to decline long before signs work your way through the alphabet, you come market through stock selection, underweighting of trouble become obvious. to the ―P‖ stocks, and another candidate appears. the market’s biggest winners can be just as It’s a prominent player in a major industry painful as overweighting the biggest losers. Many observers in recent years predicted that (good), but operates in a notoriously cyclical Investors are often caught flat-footed by stocks a recovery in the housing industry would be industry (not so good), is currently losing money that do much better or much worse than the broad agonizingly slow, and they were right. Many (definitely not good), pays no dividend, and has a market, and the problem is not limited to investors in recent years have avoided housing junk-bond credit rating of BB-minus. Next! You individuals. Not one of the 10 seasoned stocks as a consequence, and they’ve been push the ―delete‖ key and move on. professionals participating in Barron’s annual wrong: Housing stocks have outperformed the Roundtable stock-picking panel in early January broad US stock market by a healthy margin from Congratulations. You just passed up 2012 mentioned homebuilding stocks or any the market low in March 2009 to the present day. the best-performing stock in the entire housing-related firms. S&P 500 Index for 2012. BOTTOM LINE: Markets have 101 ways to The recent surge in housing shares also serves remind us of Nobel laureate Merton Miller’s Shares of PulteGroup, a Michigan-based as a reminder that stock prices are forward- observation—diversification is the investor’s homebuilder with a 60-year history, jumped looking and tend to rise or fall well in advance best friend. 187.8% last year amid strong performance of clear changes in company fundamentals. for the entire industry. For the year endingDiversification does not eliminate the risk of market loss. Past performance is no guarantee of future results . Adapted from “Betting against the House” by Weston Wellington, Down to the Wire column on Dimensional’swebsite, February 2013. This information is provided for educational purposes only and should not be considered investment advice or a solicitation to buy or sell securities. Dimensional Fund Advisors LP is an investmentadvisor registered with the Securities and Exchange Commission. 14