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| While equity markets are not as fundamentally cheap as they were at the beginning of 2012 they remain relatively much more attractive than government bonds. We are overweight emerging markets on a valuation basis and have also tilted the recommended portfolio towards high-dividend stocks. We have also added to our Japanese exposure on a currency-hedged basis in the expectation of renewed reflation efforts by the Bank of Japan. Within Fixed Income we continue to exit duration risk (i.e. government bonds) in favour of credit risk (high yield, emerging markets and convertible bonds). |
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| The US economy continues to produce modest but consistent growth (Q1 GDP was 2.5%) and steadily declining unemployment (April jobless rate declining to 7.5%). This new ‘lukewarm’ rather than ‘goldilocks’ environment, neither too hot nor too cold, should allow the Fed to continue its current accommodative stance which is positive for US stocks. Combine US growth with a new rate cut by the European Central Bank to 0.5% and there is ample support for all risky assets. The S&P 500 index rose 1.8% in April and is up a healthy 12% so far in 2013. |
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| A stronger US economy offset a seemingly irrelevant Europe during the first quarter. With the rolling European fiscal crisis having spread to Cyprus, this produced little effect on investors unable to find the tiny eastern Mediterranean country on a map. The S&P500 index rose 3.6% for the month and 10.0% for the quarter, following the Dow into record-high territory. The S&P500 closed at 1,569.19, breaking the previous closing record of 1,565.15 set on October 9th, 2007.The Nikkei 225 index continued to surge, gaining 7.3% on the back of a weakening Yen, and is up an incredible 19.3% for the year. |
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US stocks continued to climb the proverbial "wall of worry" as mandatory budget cuts through sequestration were viewed as potentially less damaging to the economy than the 'fiscal cliff' showdown just two months earlier. The S&P500 index ended up 1.1% for the month and at the time of writing the Dow Jones Industrial Average is hitting a new all-time record high. Japan's Nikkei 225 index continued to surge, gaining 3.8% on the back of a weakening Yen.
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The economic history of China stretches over thousands of years, under-going alternating cycles of prosperity and decline. For centuries China stood as a leading civilization, outpacing the rest of the world in both the arts and sciences. However, in the late Qing period (1644 – 1912), China's economic development began to slow and Europe's rapid development from the Late Middle Ages and Renaissance onwards enabled it to surpass China; an event known as the 'Great Divergence'.
Click here for full Global Country Review Report for China
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Markets shrugged off a surprising drop in US GDP in Q4 and pushed many equity indices to their highest levels in 5 years. Although the GDP decline was a mere –0.1%, it was still rather unsettling. There has only been one occasion over the last 50 years (in 1977) when a single negative GDP growth reading did not presage a full-blown recession (defined as 2 consecutive quarters of negative GDP).
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Markets in 2012 were dominated by politics, leaving many fundamental investors and stock-pickers struggling with a ‘risk on, risk off’ investment environment. European leaders tackled the debt crisis at multiple summits that proved largely ineffective. Ultimately, it was left to the European Central Bank’s pledge to “do whatever it takes” to calm markets. America’s political landscape was largely unchanged despite a record $2 billion spent on an election which saw Barack Obama re-elected as President while Republicans kept control of the House and the Democrats, the Senate.
Click here for full US Market Sector Outlook
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Santa did not disappoint and duly delivered his equity rally to investors in December,particularly in Asia Pacific and the emerging markets. US markets were again a laggard, this time the victim of “fiscal cliff” worries and the inability of both the White House and the Republican-controlled Lower House to forge a workable compromise. The S&P500 index ended up 0.7% for the month and returned a very credible 13.4% excluding dividends for 2012.
Click here for full Quarterly Local Economic Report.
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While growth prospects are still nowhere near what we would want them to be, 2012 is shaping up to be the third successive year of growth for our economy post the Great Recession of 2008. The outlook for our primary tourism industry continues to improve as ongoing travel incentive programs jointly sponsored by the Ministry of Tourism and the private sector continue to yield positive results; however we question the sustainability of such initiatives.
Click here for full Quarterly Local Economic Report.
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Santa did not disappoint and duly delivered his equity rally to investors in December, particularly in Asia Pacific and the emerging markets. US markets were again a laggard, this time the victim of "fiscal cliff" worries and the inability of both the White House and the Republican-controlled Lower House to forge a workable compromise. The S&P500 index ended up 0.7% for the month and returned a very credible 13.4% excluding dividends for 2012.
Click here for full December Report of the Global Economic Overview.
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