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The financial markets in 2012: how did your portfolio do? |
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Page 1 of 3 The 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:
Market
|
Reference
index recommended by our site
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Returns in 2012
( %)
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debt- Canada
|
DEX Universe Bond Index
|
3.6
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Equity- Canada
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S&P/TSX composite
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7.2%
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Equity-USA
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S&P500
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16.0% (in $USA) (15.6% in CDN $)
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Equity- other developed countries
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EAFE
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13.6% (in $USA) (13.3% in CDN $)
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Equity- emerging markets
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EM
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15.2% (in $USA) (14.9% in CDN $)
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$CA/USA
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-
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2.2%
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$CA/Euro
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-
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0.7%
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Sources: Bank of Canada
Standard & Poors 500 ; Standard & Poors TSX
Composite ; MSCI
EAFE & EM; PC Bond Analytics. Gold was up 7.1% (US$) 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 HowToInvestOnline.blogspot.ca
. 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.
<< Start < Prev 1 2 3 Next > End >> |
Last Updated ( Sunday, 06 January 2013 )
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