1st Quarter Market Update

   First Quarter 2012 Market Update

With the first quarter of  2012 now behind us it appears that confidence in the economies of the world are looking up. Investors have returned the recent market depressions of the last 8 months to new recent highs, led by the increasing likelihood of economic prosperity in the US. If there were ever a time to eschew the virtues of accepting market volatility and the frequent short-term rises and falls of investing in equities, the last 8 months provides an excellent example to do so.
  Since the recent lows of late 2011, the S&P index has recovered 21% and the Dow has once again surpassed the 13000 mark. The US markets have over-contributed to a very speedy rise in first quarter composite world markets.This is best shown by first quarter returns of the Nasdaq of 18% and a more global benchmark, the MSCI All Countries World Index, trailing with a respectable first quarter gain of 10.5%.
  For investors who choose to be invested by and large in Canada, the returns have not been so generous.The first quarter return for the TSX composite index was 3.7%, trailing many other country indexes for the same time frame. This serves as a reminder that Rowe and Mali prefers to invest in global equities and/or fixed income investments at ALL times of the economic cycle due to the loss of opportunity to our clients portfolios.
 
    Next for markets.

    We believe that equity markets are still undervalued overall. Much of investor money which was pulled from equity markets during the downfall of 2008 has not yet returned in force to move markets into the next phase of fair valuation and back to all-time highs. Furthermore, governments continue to promote growth exercises for their respective economies which should reduce fears and provide a catalyst to invest in equity markets above fixed income investments.
    We are placing the risk within global equity markets at 30-40%, which means that there is a lower amount of risk for investors looking for gains in equity markets than there will be if the market had been overvalued, in a high interest rate atmosphere,(which is an obstacle to equities), lower job or economic growth forecasts, etc. One of the key benchmarks in reviewing the overall equity market risk for our clients is the current level of markets to their all-time highs. At the current time, most markets continue to sit about 10-20% below those highs and so our equity market risk will remain low.
  For the remainder of 2012, we expect to have positive market numbers in the range of 10-13%. Also, expect that there will be an inevitable correction in markets at some point and that the pace of the first quarter will not continue to grow uninterrupted of volatility. For our clients with high Canadian equity component in their portfolio, we think that Canadian stock will rise at a faster pace for the remainder of the year than most other markets, especially if other markets continue to perform well, most notably the US market.

  Got questions? visit us at roweandmali.com and use our contact us link or comment below.