By Lachman Balani
TORONTO: After a dismal 2011, where most major bourses lost ground, 2012 has been a positive year!
- DAX of Germany, up 29.06 %, is the best performing bourse followed by BSE (India) which is up 25.19%.
At the beginning of 2012 many financial pundits said that the US was on the mend and that the S&P 500 which was flat in 2011 would play catch up with the Dow that had enjoyed an annual gain of 5.5% the same year.
These pundits also pointed out that historically in an election year the US markets tend to end in positive territory.
Another factor in favour of the US markets was that the debt crisis in the Eurozone and the political turmoil in certain parts of North Africa and the Middle East would see private and sovereign money flow into the US, the last bastion of capitalism.
They were bang on the money as the S&P jumped to a double-digit gain percentage-wise and the Dow Jones gained 7.26%. Even Mother Nature in the form of superstorm Sandy that shut the New York Stock Exchange for two days could not stop its onward march; nor could the man-made fiscal cliff deadline of Dec 31, 2012.
As a matter of fact, technically, as the US House did not vote by the midnight deadline, the US has fallen off the ‘fiscal cliff’, yet on Dec 31 the Dow closed with a triple digit gain at 13,104.14.
However, the big surprise was that the doom and gloom painted at the outset on the Eurozone, by many experts in Canada and the US, predicting that Greece would exit the Eurozone by year-end and that there would be continued malaise in Spain, Portugal and Italy, therefore extending the losses in the main European bourses, did not come to pass.
Instead, the troika of the European Commission, the International Monetary Fund and the European Central Bank set up emergency funds to help Greece, Spain, Italy and any other Eurozone nations that wished to seek aid, thus helping to momentarily stabilize the precarious situation in Europe and boost the markets.
The most watched stock markets of the Eurozone – DAX (Germany), CAC (France) and FTSE (UK) – all came through with flying colors. To paraphrase a well-known Christmas carol, all is presently calm but not all is bright for the Eurozone.
Another surprise was that financial gurus indicated that the continuous demand for oil and natural resources plus the forecasted upswing in the US markets would also drive up the TSX and have it regain the 11% it lost in 2011. Only the US came through as the growth in BRIC countries slowed, crimping demand for Canada’s natural resources.
The Toronto Stock Exchange or TSX has only gained 4% in 2012, closing much below its 2010 close of 13,433.22.
There are many other factors that helped shape the trajectories of the markets. Only three have been outlined above.
Here’s a look at how some major stock markets performed.
Bourse Dec 30, 2011 close Dec 31, 2012 close Change % change
Dow Jones (US) 12,217.56 13,104.14 +886.58 +7.26%
S&P 500 (US) 1,257.60 1,426.19 +168.59 +13.41%
Nasdaq (US) 2,605.15 3,019.51 +414.36 +15.91%
TSX (Canada) 11,955.09 12,433.53 +478.44 +4.00%
FTSE 100 (UK) 5,572.28 5,897.81 +325.53 +5.84%
DAX (Germany) 5,898.35 7,612.39 +1,714.04 +29.06%
CAC (France) 3,159.81 3,641.07 +481.26 +15.23%
Bovespa (Brazil) 56,754.08 60,952.08 +4,198.00 +7.40%
MICEX (Russia) 1,402.24 1,479.58 +77.34 +5.51%
BSE (India) 15,517.92 19,426.71 +3,908.79 +25.19%
Hang Seng (HK) 18,434.39 22,656.92 +4,222.53 +22.90%
Shanghai Composite 2,199.42 2,269.13 +69.71 +3.17%
Nikkei (Japan) 8,455.35 10,395.18 +1939.83 +22.94%
Kospi (South Korea) 1,825.74 1.997.05 +171.31 +9.38%
It is worth mentioning that certain N-11 and frontier markets have also performed quite well. Indonesia, Mexico, Australia, Singapore, Taiwan, Malaysia, Turkey (55% up) and many more have given positive returns. What is most baffling is the 50% run-up in the Tehran Tepix. Venezuela also returned a staggering 300%!
Since many investors have money in bond funds, here are the values for the most common bond indices. It is interesting to note the bond bubble talk that started in 2010 and gained momentum early this year turned out to be a damp squib. The last three years saw many popular bond funds returning in the vicinity of 6% (2010), 8%(2011) and 3% (2012).Bond funds have been giving positive returns for the last 30 years.
Bond funds Value Market value Term % YTD return
DEX Universe Bond Index 894 $1.22 Trillion 9.88 years 3.60%
DEX Universe All Corporate Bond Index 984 $339.6 billion 8.92 years 6.22%