Q4Quarterly Market Review         Fourth Quarter 2012
Quarterly Market ReviewFourth Quarter 2012This report features world capital market         Overview:performance and a tim...
Market SummaryFourth Quarter 2012 Index Returns                  US                  International            Emerging    ...
Timeline of Events: Quarter in ReviewFourth Quarter 2012  Euro zone                                                       ...
World Asset ClassesFourth Quarter 2012 Index ReturnsGlobal equity markets followed a strong third quarter with positive re...
US StocksFourth Quarter 2012 Index ReturnsUS small cap stocks and US value stocks                                     Rank...
International Developed StocksFourth Quarter 2012 Index Returns                                                           ...
Emerging Markets StocksFourth Quarter 2012 Index Returns                                                                  ...
Select Country PerformanceFourth Quarter 2012 Index ReturnsEurope led developed markets returns, as the IMF, ECB, and EU p...
Real Estate Investment Trusts (REITs)Fourth Quarter 2012 Index ReturnsInternational REITs continued to outperform         ...
CommoditiesFourth Quarter 2012 Index ReturnsCommodities sold off in the fourth                                          In...
Fixed IncomeFourth Quarter 2012 Index Returns                                                                             ...
Global DiversificationFourth Quarter 2012 Index ReturnsThese portfolios illustrate the performance                        ...
The Top Ten Money ExcusesFourth Quarter 2012Human beings have an astounding                               3) "I WANT TO LI...
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4th Quarter 2012 Quarterly Market Review

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Voyager Capital Management's Quarterly Review of October thru December's market performance.

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4th Quarter 2012 Quarterly Market Review

  1. 1. Q4Quarterly Market Review Fourth Quarter 2012
  2. 2. Quarterly Market ReviewFourth Quarter 2012This report features world capital market Overview:performance and a timeline of events forthe last quarter. It begins with a globaloverview, then features the returns of stock Market Summaryand bond asset classes in the US andinternational markets. Timeline of EventsThe report also illustrates the performance World Asset Classesof globally diversified portfolios and featuresa 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: The Top Ten Money Excuses 2
  3. 3. Market SummaryFourth Quarter 2012 Index Returns US International Emerging Global Global Stock Developed Markets Real US Bond Bond Market Stocks Stocks Estate Market Market +0.25% +5.93% +5.58% +3.82% +0.22% +0.89% STOCKS BONDSPast performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated withthe management of an actual portfolio. Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI Worldex USA Index [net div.]), Emerging Markets (MSCI Emerging Markets Index [net div.]), Global Real Estate (S&P Global REIT Index), US Bond Market (Barclays US AggregateBond Index), and Global Bond Market (Barclays Global Aggregate Bond Index [Hedged to USD]). The S&P data are provided by Standard & Poors Index Services Group. Russelldata copyright © Russell Investment Group 1995–2012, all rights reserved. MSCI data copyright MSCI 2012, all rights reserved. Barclays data provided by Barclays Bank PLC. USlong-term bonds, bills, and inflation data © Stocks, Bonds, Bills, and Inflation Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A.Sinquefield). 3
  4. 4. Timeline of Events: Quarter in ReviewFourth Quarter 2012 Euro zone Swiss bank UBS agrees to unemployment pay $1.5 billion in fines to continues to rise, international regulators in reaching new high of Consumer debt in Canada connection with LIBOR scandal. 11.6% in September. reaches record 166% of disposable income. US Congress Japan launches additional Hurricane Sandy devastates struggles to stimulus to help boost portions of Caribbean and come to deal to country’s declining GDP. Mid-Atlantic coast of US. avert “fiscal cliff.” Barack Obama Growth in China’s Euro zone officially re-elected president economy continues falls back into of United States. to slow for seventh recession, marking straight quarter. its second downturn in four years. S&P 500 Index1,444 1,4269/30/2012 12/31/2012The graph illustrates the S&P 500 Index price changes over the quarter. The return of the price-only index is generally lower than the total return of the index that also includes thedividend returns. Source: The S&P data are provided by Standard & Poors Index Services Group. The events highlighted are not intended to explain market movements. 4
  5. 5. World Asset ClassesFourth Quarter 2012 Index ReturnsGlobal equity markets followed a strong third quarter with positive returns in the fourth quarter, as most major globalindices ended the year with gains. Developed markets outside the US led equity returns, followed by global REITs. MSCI World ex USA Value Index (net div.) 6.96 S&P Global ex US REIT Index (net div.) 6.19 MSCI World ex USA Index (net div.) 5.93 MSCI Emerging Markets Index (net div.) 5.58 MSCI Emerging Markets Small Cap Index (net div.) 5.10 MSCI World ex USA Small Cap Index (net div.) 4.84 MSCI Emerging Markets Value Index (net div.) 4.70 Dow Jones US Selected REIT Index 2.31 Russell 2000 Index 1.85 Russell 1000 Value Index 1.52 Barclays US Aggregate Bond Index 0.22 One-Month US Treasury Bills 0.02 -0.38 S&P 500 IndexPast performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated withthe management of an actual portfolio. Market segment (index representation) as follows: US Large Cap (S&P 500 Index), US Small Cap (Russell 2000 Index), US Value(Russell 1000 Value Index), US Real Estate (Dow Jones US Select REIT Index), Global Real Estate (S&P Global ex US REIT Index), International Developed Large, Small, andValue (MSCI World ex USA, ex USA Small, and ex USA Value Indexes [net div.]), Emerging Markets Large, Small, and Value (MSCI Emerging Markets, Emerging MarketsSmall, and Emerging Markets Value Indexes), US Bond Market (Barclays US Aggregate Bond Index), and Treasury (One-Month US Treasury Bills). The S&P data are provided byStandard & Poors Index Services Group. Russell data copyright © Russell Investment Group 1995–2012, all rights reserved. MSCI data copyright MSCI 2012, all rights reserved.Dow Jones data (formerly Dow Jones Wilshire) provided by Dow Jones Indexes. Barclays data provided by Barclays Bank PLC. US long-term bonds, bills, and inflation data ©Stocks, Bonds, Bills, and Inflation Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield). 5
  6. 6. US StocksFourth Quarter 2012 Index ReturnsUS small cap stocks and US value stocks Ranked Returns for the Quarter (%)experienced positive performance in thefourth quarter, which contributed to slightlypositive broad market returns of 0.25%. Small Cap Value 3.22Large cap and large cap growth stocks hadnegative returns of -0.38% and - Small Cap 1.851.32%, respectively. Small cap value stocksenjoyed the best performance, up 3.22% Large Cap Value 1.52for the quarter. Small Cap Growth 0.45US stocks across the board were positive forthe year ended December 31, 2012. Marketwide 0.25 -0.38 Large Cap -1.32 Large Cap GrowthWorld Market Capitalization—US Period Returns (%) Asset Class 1 Year 3 Years** 5 Years** 10 Years** Marketwide 16.42 11.20 2.04 7.68 Large Cap 16.00 10.87 1.66 7.10 46% US Market Large Cap Value Large Cap Growth 17.51 15.26 10.86 11.35 0.59 3.12 7.38 7.52 $15.7 trillion Small Cap 16.35 12.25 3.56 9.72 Small Cap Value 18.05 11.57 3.55 9.50 Small Cap Growth 14.59 12.82 3.49 9.80 * AnnualizedPast performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated withthe management of an actual portfolio. Market segment (index representation) as follows: Marketwide (Russell 3000 Index), Large Cap (S&P 500 Index), Large Cap Value(Russell 1000 Value Index), Large Cap Growth (Russell 1000 Growth Index), Small Cap (Russell 2000 Index), Small Cap Value (Russell 2000 Value Index), and Small Cap Growth(Russell 2000 Growth Index). World Market Cap: Russell 3000 Index is used as the proxy for the US market. Russell data copyright © Russell Investment Group 1995–2012, allrights reserved. The S&P data are provided by Standard & Poors Index Services Group. 6
  7. 7. International Developed StocksFourth Quarter 2012 Index Returns US CurrencyInternational developed equities posted Ranked Returns for the Quarter (%) Local Currencystrong performance, with all major assetclasses showing gains for the quarter.The US dollar appreciated relative to most 6.96major foreign developed currencies. Value 7.87Across the size and style spectrum, large 5.93caps outperformed small caps and value Large Capoutperformed growth. 6.90 4.90 Growth 5.95 4.84 Small Cap 6.68World Market Capitalization—International Developed Period Returns (%) Asset Class 1 Year 3 Years** 5 Years** 10 Years** Large Cap 16.41 3.65 -3.43 8.6041%International Small Cap Value 17.48 17.29 7.19 2.78 -0.70 -3.72 12.04 9.06 Developed Growth 15.48 4.46 -3.18 8.05 Market $13.8 trillion * AnnualizedPast performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated withthe 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 CapIndex), Value (MSCI World ex USA Value Index), and Growth (MSCI World ex USA Growth). All index returns are net of withholding tax on dividends. World Market Cap: Non-USdeveloped market proxies are the respective developed country portions of the MSCI All Country World IMI ex USA Index. Proxies for the UK, Canada, and Australia are therelevant subsets of the developed market proxy. MSCI data copyright MSCI 2012, all rights reserved. 7
  8. 8. Emerging Markets StocksFourth Quarter 2012 Index Returns US CurrencyEmerging markets returned 5.58%, with Ranked Returns for the Quarter (%) Local Currencyall other major equity sub-classes postingpositive returns. The growth effect wasmixed across the size spectrum. Valueoutperformed growth in mid cap and small 6.42 Growthcap stocks but underperformed in large caps. 6.20The US dollar depreciated against most of the 5.58main emerging markets currencies. Large Cap 5.33 5.10 Small Cap 4.82 4.70 Value 4.43World Market Capitalization—Emerging Markets Period Returns (%) Asset Class 1 Year 3 Years** 5 Years** 10 Years** Large Cap 18.22 4.66 -0.92 16.52 13%Emerging Small Cap Value 22.22 15.87 4.21 4.06 0.21 0.07 17.27 18.17 Markets Growth 20.56 5.24 -1.95 14.84 $4.4 trillion * AnnualizedPast performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated withthe management of an actual portfolio. Market segment (index representation) as follows: Large Cap (MSCI Emerging Markets Index), Small Cap (MSCI Emerging MarketsSmall Cap Index), Value (MSCI Emerging Markets Value Index), and Growth (MSCI Emerging 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 USA Index. MSCI data copyright MSCI 2012, allrights reserved. 8
  9. 9. Select Country PerformanceFourth Quarter 2012 Index ReturnsEurope led developed markets returns, as the IMF, ECB, and EU provided additional aid to Greece. Egypt, theworst-performing emerging markets country, recently ratified a new Islamist-backed constitution, which has resultedin violent uprisings from opposition forces. The best-performing emerging market was Turkey, which experienced itsfirst investment-grade rating in almost two decades.Developed Markets (% Returns) Emerging Markets (% Returns) Greece 17.87 Turkey 17.66 Austria 16.79 China 13.65 Portugal 12.68 Colombia 12.25 Finland 11.93 Poland 11.88 France 10.89 Philippines 11.48 Spain 9.77Netherlands 9.59 Thailand 6.67 Italy 9.56 Peru 6.39 Germany 8.66 Mexico 6.06 Ireland 8.05 South Africa 5.82 Switzerland 7.90 Korea 4.12 Australia 6.60 Brazil 3.63 Belgium 6.45 Malaysia 3.28 Hong Kong 5.96 Japan 5.13 Russia 2.44 Sweden 4.94 Morocco 1.84 UK 4.47 Taiwan 1.02New Zealand 4.28 India 0.88 Singapore 3.65 Indonesia 0.87 Denmark 3.14 Chile 0.05 Norway 1.63 -1.41 Hungary Israel 0.38 US 0.25 -2.70 Czech Republic Canada 0.21 -10.88 EgyptCountry performance based on respective indices in the MSCI All Country World IMI Index (for developed markets), Russell 3000 Index (for US), and MSCI Emerging Markets IMIIndex. All returns in USD and net of withholding tax on dividends. MSCI data copyright MSCI 2012, all rights reserved. Russell data copyright © Russell Investment Group 1995–2012, all rights reserved. 9
  10. 10. Real Estate Investment Trusts (REITs)Fourth Quarter 2012 Index ReturnsInternational REITs continued to outperform Ranked Returns for the Quarter (%)US REITs in the fourth quarter, posting apositive return of 6.19% vs. 2.31%.US REITs rebounded from four consecutivemonths of negative returns, while Global REITs (ex US) 6.19international REITs posted their fifth straightpositive quarter. US REITs 2.31Total Value of REIT Stocks Period Returns (%) Asset Class 1 Year 3 Years** 5 Years** 10 Years** US REITs 17.12 17.94 5.08 11.4842% Global REITs (ex US) 31.92 12.12 -1.28 10.43World ex US * Annualized$303 billion 165 REITs (19 other 58% countries) US $413 billion 83 REITsPast performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated withthe management of an actual portfolio. Number of REIT stocks and total value based on the two indices. All index returns are net of withholding tax on dividends. Dow Jones USSelect REIT Index data provided by Dow Jones ©. S&P Global ex US REIT Index data provided by Standard and Poor’s © 2012. 10
  11. 11. CommoditiesFourth Quarter 2012 Index ReturnsCommodities sold off in the fourth Individual Commodity (% Returns)quarter, erasing much of the ground gained inthe prior period. Concerns about the pace ofglobal economic growth generally drove Lean Hogs 8.29values lower. Cotton 5.36Hard commodities fell. Values for petroleum- Live Cattle 2.91based commodities also generally Brent Oil 0.07fell, reflecting slower global consumption Unleaded Gas -0.29patterns and recessionary economic -2.17 WTI Crude Oilconditions in various markets. -2.44 ZincSoft commodities offered a mixed experience -3.09 Heating Oilfor investors. Lean hogs, cotton, and cattle -3.12 Copperadvanced, while coffee, wheat, and soybeanssuffered large declines. -3.26 Aluminum -4.46 Sugar -5.65 Gold -7.18 Soybean Oil -8.02 Corn -8.05 Nickel -11.15 Natural Gas -11.83 Soybean -12.80 Silver -15.19 Wheat -19.90 Coffee Period Returns (%) Asset Class Q4 1 Year 3 Years** 5 Years** 10 Years** Commodities -6.33 -1.06 0.07 -5.17 4.09 * AnnualizedPast performance is not a guarantee of future results. Index is not available for direct investment. Index performance does not reflect the expenses associated with themanagement of an actual portfolio. All index returns are net of withholding tax on dividends. Dow Jones-UBS Commodity Index Total Return data provided by Dow Jones ©. 11
  12. 12. Fixed IncomeFourth Quarter 2012 Index Returns US Treasury Yield CurveGlobal bonds outperformed the US bond 12/30/11 3market in the fourth quarter, and investors’ 12/30/12 9/30/12hunger for yield remained strong. 2Non-US government bonds significantlyoutperformed US Treasuries, as Europeanpolitical and economic conditions appeared 1to stabilize.Low credit quality corporate bonds 0outperformed in both the US and developed 3Mmarkets, as market participants sought yieldin a global environment of low rates. Bond Yields across Different IssuersThe US TIPS Index generated a positive 3.58return. US TIPS have outpaced nominalUS Treasury returns over both short- and 1.76long-term horizons. 1.31 0.59 10-Year US State and Local AAA-AA A-BBB Treasury Municipals Corporates CorporatesPeriod Returns (%) Asset Class 1 Year 3 Years** 5 Years** 10 Years** One-Month US Treasury Bills (SBBI) 0.06 0.07 0.40 1.65 Bank of America Merrill Lynch Three-Month T-Bills 0.11 0.11 0.52 1.78 Bank of America Merrill Lynch One-Year US Treasury Note 0.24 0.55 1.42 2.19 Citigroup World Government Bond 1-5 Years (hedged) 2.10 2.13 3.04 3.32 US Long-Term Government Bonds (SBBI) 3.31 13.42 9.33 7.50 Barclays Corporate High Yield 15.81 11.86 10.34 10.62 Barclays Municipal Bonds 6.78 6.57 5.91 5.10 Barclays US TIPS Index 6.98 8.90 7.04 6.66 * AnnualizedPast performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated withthe management of an actual portfolio. Yield curve data from Federal Reserve. State and local bonds are from the Bond Buyer Index, general obligation, 20 years tomaturity, mixed quality. AAA-AA Corporates represent the Bank of America Merrill Lynch US Corporates, AA-AAA rated. A-BBB Corporates represent the Bank of America MerrillLynch US Corporates, BBB-A rated. Barclays data provided by Barclays Bank PLC. US long-term bonds, bills, inflation, and fixed income factor data © Stocks, Bonds, Bills, andInflation (SBBI) Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield). Citigroup bond indices copyright 2012 byCitigroup. The Merrill Lynch Indices are used with permission; copyright 2012 Merrill Lynch, Pierce, Fenner & Smith Incorporated; all rights reserved. 12
  13. 13. Global DiversificationFourth Quarter 2012 Index ReturnsThese portfolios illustrate the performance Ranked Returns for the Quarter (%)of different global stock/bond mixes andhighlight the benefits of diversification. 100% Stocks 3.01Mixes with larger allocations to stocks are 75/25 2.26considered riskier but also have higher 50/50 1.51expected returns over time. 25/75 0.77 100% Treasury Bills 0.02 Period Returns (%) Asset Class 1 Year 3 Years** 5 Years** 10 Years** 100% Stocks 16.80 7.19 -0.61 8.66 75/25 12.57 5.66 0.10 7.16 50/50 8.37 3.95 0.50 5.48 25/75 4.19 2.09 0.59 3.64 100% Treasury Bills 0.06 0.07 0.40 1.65 * AnnualizedGrowth of Wealth: The Relationship between Risk and Return Stock/Bond Mix60,000 100% Stocks50,000 75/2540,000 50/50 25/7530,000 100% Treasury Bills20,00010,000 01/1988 01/1991 01/1994 01/1997 01/2000 01/2003 01/2006 01/2009 01/2012Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated withthe management of an actual portfolio. Asset allocations and the hypothetical index portfolio returns are for illustrative purposes only and do not represent actualperformance. Indices are not available for direct investment. Index performance does not reflect expenses associated with the management an actual portfolio. Global Stocksrepresented by MSCI All Country World Index (gross div.) and Treasury Bills represented by US One-Month Treasury Bills. Globally diversified portfolios rebalanced monthly.Data copyright MSCI 2012, all rights reserved. Treasury bills © Stocks, Bonds, Bills, and Inflation Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G.Ibbotson and Rex A. Sinquefield). 13
  14. 14. The Top Ten Money ExcusesFourth Quarter 2012Human beings have an astounding 3) "I WANT TO LIVE TODAY. 8) "THE GUY AT THE BAR/MYfacility for self-deception when it TOMORROW CAN LOOK UNCLE/MY BOSS TOLD ME…”comes to our own money. AFTER ITSELF.” The world is full of experts; many recycle Often used to justify a reckless stuff theyve heard elsewhere. But even ifWe tend to rationalize our own fears. purchase, its not either/or. You can their tips are right, this kind of adviceSo instead of just recognizing how live today and mind your savings. rarely takes your circumstances intowe feel and reflecting on the thoughts You just need to keep to your budget. account.that creates, we cut out the middle manand construct the façade of a logical- 4) "I DONT CARE ABOUT CAPITAL 9) "I JUST WANT CERTAINTY.”sounding argument over a vague feeling. GAIN. I JUST NEED THE INCOME.” Wanting confidence in your investments Income is fine. But making income is fine. But certainty? You can spend aThese arguments are often your sole focus can lead you down a lot of money trying to insure yourselfelaborate, short-term excuses that we dangerous road. Just ask anyone who against every possible outcome. While ituse to justify behavior that runs counter recently invested in collateralized cannot guard against every risk, itsto our own long-term interests. debt obligations. cheaper to diversify your investments.Here are ten of these excuses: 5) "I WANT TO GET SOME OF 10) "IM TOO BUSY TO THOSE LOSSES BACK.” THINK ABOUT THIS.”1) "I JUST WANT TO WAIT TILL Its human nature to be emotionally We often try to control things we cantTHINGS BECOME CLEARER.” attached to past bets, even losing ones. change—like market and media noise—Its understandable to feel unnerved But, as the song says, you have to know and neglect areas where our actions canby volatile markets. But waiting for when to fold em. make a difference—like the costs ofvolatility to "clear" before investing investments. Thats worth the effort.often results in missing the return 6) "BUT THISthat can accompany the risk. STOCK/FUND/STRATEGY HAS BEEN Given how easy it is to pull the wool GOOD TO ME.” over our own eyes, it can pay to seek2) "I JUST CANT TAKE We all have a tendency to hold on independent advice from someoneTHE RISK ANYMORE.” to winners too long. But without who understands your needs andBy focusing exclusively on the risk of disciplined rebalancing, your portfolio circumstances and who holds you to thelosing money and paying a premium for can end up carrying much more risk promises you made to yourself in yoursafety, we can end up with insufficient than you bargained for. most lucid moments.funds for retirement. Avoiding risk canalso mean missing an upside. 7) "BUT THE NEWSPAPER SAID…” Call it the "no more excuses" strategy. Investing by the headlines is like dressing based on yesterdays weather report. The market has usually reacted already and moved on to worrying about something else.Adapted from “The Top Ten Money Excuses” by Jim Parker, Outside the Flags column on Dimensional’s website, October 2012. This information is provided for educationalpurposes only and should not be considered investment advice or a solicitation to buy or sell securities. Dimensional Fund Advisors LP is an investment advisor registered with theSecurities and Exchange Commission. 14

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