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The financial markets in 2012: how did your portfolio do? Print
index.jpegThe beginning of a new year is the ideal time for all of us to critically review the performance and composition of our portfolio. In this commentary on the year 2012, we look at how the various financial markets behaved, and the performance that would have been produced by a portfolio created following some admittedly arbitrary criteria but which are nevertheless based on the philosophy of our site. We hope it will encourage you to look at the returns and composition of your own portfolio, and consider what changes might be appropriate.  

First, a recap: 2007 to 2012 financial markets
Many of the factors at work in 2012 are the same ones that affected prior years. So let’s start with a recap of those years.

We performed the same exercise for the years 2011, 2010, 2009, 2008 and 2007, and it is interesting to note how the same factors influenced results in those years, but not always in the same direction; see for example  The financial markets in 2011: how did your portfolio do?  

  • The equity markets, while performing positively but modestly in 2007, were directly affected by rising oil prices with the resulting dramatic increase in the Canadian dollar against the U.S. dollar and to a lesser extent against the euro.
  • In 2008, just the opposite: the equity markets plunged, and the price of oil plummeted, causing a sharp fall in the Canadian dollar against the USD and against the euro; this sharp drop cushioned equity losses for Canadian investors.  
  • In 2009 the price of oil rebounded sharply (without threatening the historic highs of 2008), the Canadian bond market remained relatively stable, the housing market hit its low in May and ended up for the year in Canada, the Canadian dollar rose against almost all currencies, and global equity markets, after hitting rock bottom in March 2009, made a spectacular recovery.
  • In 2010, the price of oil rebounded  sharply towards year-end ( without threatening the historic highs of 2008), the Canadian bond and residential real estate markets remained strong, the Canadian dollar, propelled by the comparatively better economic performance of the Canadian economy and by rising oil prices rose against almost all currencies, and the canadian and most other equity markets for a second year experienced strong numbers.
  • In 2011, our model portfolio was saved by the 50% weighting in bonds, which offset poor equity returns in Canada and most places outside Canada; the Canadian dollar had little impact. .

2012 financial markets

In 2012, the price of oil was down (bad for Canadian equities) and of gold was up by the same percentages (7%), the Canadian residential real estate markets finally started slowing after important multii-year gains, interest rates remained low continuing to hit pensioners, the Canadian dollar gained marginally against the US dollar and
remained essentially flat against the Euro as the Euro-zone crisis subsided, and  most equity markets had strong total returns, except, significantly, the canadian equity market whose total return was more modest.

When the dust had settled here are the numbers for the year 2012:


Reference index recommended by our site

Returns in 2012

 ( %)

debt- Canada

DEX Universe Bond Index


Equity- Canada

S&P/TSX composite 




16.0% (in $USA) (15.6% in CDN $)

Equity- other developed countries 


13.6% (in $USA) (13.3% in CDN $)

Equity- emerging markets 


15.2% (in $USA) (14.9% in CDN $)







Sources: Bank of Canada  Standard & Poors 500 ; Standard & Poors TSX Composite ; MSCI EAFE & EM; PC Bond Analytics. Gold was up 7.1% (US$) and oil (WTI- US$) was down 7.1%. For other discussions of 2012, see  CanadianCapitalist  and The Capital Spectator .

NB- For the difficulty in finding  information sources on total returns versus price returns for Canadian markets see . For the returns of the various markets for the past 10 years, and for more information on the major indexes, see Investment Returns and Indexes on our site. Before discussing the figures for 2012, we want to draw the attention of our readers to a free and very useful Canadian source where you can find centralized financial data of historical data since 1982: it is the site of Libra Investment Management (see on their website under Links-Research. Libra describes itself as a fee-only adviser who draws its compensation solely from its clients, an approach favored by our site; see the section Independent Adviser on our site.

Last Updated ( Sunday, 06 January 2013 )
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