Capital markets posted encouraging results in the third quarter
of 2012. After a brief decline early in the period, several of the world’s
major equity indexes rallied through the summer months, resulting in positive
returns for quarter and the year-to-date.
The MSCI World Index was up 6.8% in local currency terms in
the quarter, and the S&P 500 Index in the U.S.
Overseas, European indexes continued to mirror the economic
and fiscal uncertainty in the region, but many of those markets also benefited
from more forceful commitments by politicians and central bankers to tackle the
sovereign debt crisis. Near the end of July, the European Central Bank pledged
to do “whatever it takes” to preserve the euro, and later announced a
bond-buying program to help control borrowing costs for indebted nations such
as Spain Germany ,
France and the U.K. In Asia,
indexes posted mixed results in light of the slowing economy in China Hong Kong ,
Korea and Singapore
Bond prices edged higher and yields continued to decline
through the period, with the DEX Universe Bond Index rising 1.2% for the
quarter and 3.3% for the year-to-date.
It is worth noting that the 10-year Government of Canada
bond now has a yield of about 1.7%. Bond investments remain an important part of
most portfolios because of their stability; however, yields at these levels
provide negative returns after inflation and taxes (for non-registered
accounts).
The second quarter’s mainly positive equity market results
can be attributed to several factors, most notably the anticipation and
implementation of quantitative easing programs designed to maintain low
interest rates and support the financial system in the U.S. , Europe and Japan
Despite these gains, many observers remain anxious. Factors that
are fuelling concern include the Eurozone’s ongoing sovereign debt problems, the
rapidly approaching “fiscal cliff” in the United
States that threatens to dampen economic growth, and the
slowdown in China
In the meantime, many public companies are doing well and creating
value for investors, as can be seen by taking a longer view of the market. Since
the March 2009 low point following the financial crisis, the S&P 500 Index
has more than doubled in value, and the S&P/TSX Composite Index is up more
than 50%. Economic recoveries rarely proceed uniformly upward. But many of the
conditions necessary for continued progress are in place, as indicated by
corporate profit reports. As the saying goes, markets have been “climbing a wall
of worry.”
The past quarter has shown once again that it is not easy to
predict when the market will move up. As a result, I continue to believe that a
well-diversified portfolio that includes both equity and fixed income funds
makes sense for most investors. Equities still remain the best way to benefit
from long-term economic growth and to stay ahead of inflation.
Should you have any questions about your investment
portfolio or the markets in general, please don’t hesitate to give me a call.
Have a great weekend,
Tracey
The
information in this post is derived from various sources, including CI
Investments, Signature Global Advisors, Harbour Advisors, Globe and Mail,
National Post, Bank of Montreal Economics, and Morningstar Canada. Index
information in paragraphs 2 to 4 were provided by TD Newcrest, PC Bond, and
the Bank of Canada. This material is provided for general information and is subject to
change without notice. Every effort has been made to compile this material from
reliable sources; however, no warranty can be made as to its accuracy or
completeness. Before acting on any of the above, please contact
me for individual financial advice based on your personal circumstances.
No comments:
Post a Comment