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2012: The Year It Didn't Happen

As we enter the new-year, it may be worthwhile to reflect on 2012. Please see the article below written by Weston Wellington, Vice President with Dimensional Fund Advisors, entitled “2012: The Year It Didn’t Happen.” The article reminds us that, as is so often the case, earning the rewards offered by the world’s capital markets requires a combination of discipline and detachment from the ominous headlines that we are bombarded with daily. I hope that you find the article worthwhile.

We at Portfolio Advisors wish you the very best that 2013 can offer, and we remain here to serve you.

Warm Regards

The Portfolio Advisors Team

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January 5, 2013

2012: The Year It Didn’t Happen

Weston Wellington

Down to the Wire

Vice President, Dimensional Fund Advisors

Judging by the headlines in the financial press, investors spent much of the past year anxiously awaiting one calamity after another that failed to occur. The plunge off the so-called fiscal cliff was averted. The euro zone did not fall apart. China’s economy and stock market did not crash. The bond market did not implode. The re-election of President Barack Obama did not derail the US market. The “flash glitch” in early August did not lead to further trading disruptions. Doomsday did not arrive on December 21, as some interpreters of the Mayan calendar suggested it would.

Instead, the belief that owning a share of the world’s businesses is a sensible idea appears to be alive and well, despite suggestions from some observers that the “cult of equity” is dead. For the year, total return was 16.42% for the MSCI World Index in local currency, and 16.00% for the S&P 500 Index. Among forty-five global stock markets tracked by MSCI, only three posted negative results in local currency (Chile, Israel, and Morocco), and twelve markets had total returns in excess of 25%, with Turkey leading the pack at 55.8%. Although much of the financial news over the past year highlighted Europe’s fragile financial health, most of the region’s equity markets outperformed the US, including Austria, Belgium, Denmark, France, Germany, the Netherlands, Sweden, and Switzerland. For US dollar-based investors, results were further enhanced by a modest decline in the US dollar relative to the euro, the Danish krone, and the Swiss franc.

As is so often the case, earning the rewards offered by the world’s capital markets may have required a combination of discipline and detachment that eluded many investors.

2012 Index and Country Performance

Total return (gross dividends) for 12-month period ending December 31, 2012.

MSCI Index
Local Currency
USD
WORLD
16.42%
16.54%
WORLD ex USA
16.73
17.02
EAFE
17.89
17.90
EMERGING MARKETS
17.39
18.63
EMERGING + FRONTIER MARKETS
17.15
18.35
TURKEY
55.80
64.87
EGYPT
54.66
47.10
BELGIUM
38.56
40.72
PHILIPPINES
38.16
47.56
THAILAND
30.84
34.94
DENMARK
30.37
31.89
GERMANY
30.07
32.10
INDIA
29.96
25.97
HONG KONG
28.01
28.27
POLAND
27.05
40.97
AUSTRIA
25.07
27.02
SOUTH AFRICA
25.07
19.01
COLOMBIA
23.87
35.89
SINGAPORE
23.54
30.99
NEW ZEALAND
23.28
30.38
CHINA
22.85
23.10
JAPAN
21.78
8.36
FRANCE
20.93
22.82
AUSTRALIA
20.77
22.30
MEXICO
20.09
29.06
PERU
19.73
20.24
THE NETHERLANDS
19.35
21.21
SWITZERLAND
18.91
21.47
SWEDEN
17.11
23.41
USA
16.13
16.13
FINLAND
14.71
16.50
KOREA
12.89
21.48
TAIWAN
12.84
17.66
HUNGARY
11.86
22.79
INDONESIA
11.83
5.22
ITALY
11.72
13.46
NORWAY
11.63
19.70
UNITED KINGDOM
10.24
15.30
MALAYSIA
10.23
14.27
BRAZIL
10.14
0.34
RUSSIA
9.73
14.39
CANADA
7.46
9.90
IRELAND
4.66
6.29
GREECE
4.11
5.73
PORTUGAL
3.36
4.98
SPAIN
3.12
4.73
CZECH REPUBLIC
0.26
3.48
CHILE
–0.14
8.34
ISRAEL
–6.24
–3.91
MOROCCO
–12.63
–11.48
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