4th Quarter 2012 Market Update By: Gabriel PotterMBA, AIFA® 2013.01.03

Key news stories

October saw Hurricane Sandy roar through the eastern seaboard of the United States, leaving a trail of devastation across much of New Jersey and New York City.  In early November, we finally reached the end of a sharp, often bitter, election cycle.  Almost immediately following the election, the markets absorbed the continuation of the status quo with trepidation given the forthcoming Fiscal Cliff negotiations.  Those negotiations were ultimately resolved on New Year’s Day with a Senate drafted bill.

The full analysis of the election’s impact on the markets is available in the Confero Magazine cover story at http://conferomag.com

Equities

Value stocks beat Growth stock in all market capitalizations and across domestic and international markets in the 4th quarter.  After several quarters of relative weakness, international markets rallied as the Eurozone managed to get through the quarter without breaking into the news cycle.  Alternatively, US markets were relatively weak as the news cycle covered our struggles with Hurricane Sandy’s effects and Fiscal Cliff negotiations.

All index performance values (below) are for the 4th quarter of 2012.

  • Large Cap Growth - Russell 1000 Growth:   -1.32%
  • Large Cap Value - Russell 1000 Value:  1.52%
  • Small Cap Growth - Russell 2000 Growth:   0.45%
  • Small Cap Value - Russell 2000 Value:  3.22%
  • Developed International Markets: 6.57% 
  • Emerging Markets - MSCI EM:  5.58%

Bonds

For the year, long duration bonds were the winner as interest rates were presumed to be accommodative (following the Fed’s announcements, QE3 and the re-election of the President).  High yields and credit benefitted from cheap financing and relative fundamental corporate strength.

  • Barclays Aggregate Bond:  0.22%
  • Bank of America/Merrill Lynch High Yield:  3.23%
  • Barclays Capital US Intermediate Credit:  0.95%
  • Barclays Capital US Government:  -0.06%
  • Barclays Capital US Gov’t/Credit Long Duration:   0.48%

Alternatives

Corporate Real Estate reflects some of the underlying strength in consumer housing market upswing.  Commodities had a vastly divergent year.  Grains like corn, wheat and soybeans outperformed in 2012 following the summer drought, limited supply and increased price.  Conversely, energy and softs (coffee, sugar, cotton) were sharply down through the year as they both have supply gluts and lower prices.

  • Real Estate - FTSE NAREIT All REIT:  2.19%
  • Commodities - DJ UBS Commodities:  -6.33%
  • Inflation – Barclays US TIPS:  0.69%
  • Hedge Funds – DJ Credit Suisse Hedge Fund:  6.10% (through 11/30)

Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

More about Gabriel Potter
Sign up for our Newsletter
Sign up for our Newsletter