Insights into the First Half of 2012

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

U.S. stock markets at mid-year have earned a respectable 9.5% return.  A euphoric first quarter 12.6% gain gave way to a 2.8% minor setback in the second quarter. Foreign markets have not fared as well, earning only 3.4% over the first half of the year. The graph below provides the details, and adds a look at gold’s performance.  All returns presented in this commentary are un-annualized.

The correlation between U.S. and foreign stocks has been high, as measured by the S& P500 and EAFE, respectively. By contrast, gold prices have moved somewhat independently of stock markets, reinforcing gold’s diversification role. Gold has not fared well thus far in 2012, barely breaking even. Stocks have been the better investment. Commodities in general, and metals in particular, have not done well.

S& P500 and EAFE

In the following I examine the details of what has been working in global stocks, providing quick insights into market segments that have succeeded and failed. 

I conclude with a look at indexes and peer groups. In a bold departure from my prior commentaries, I predict what you are going to see when your performance reports are produced in a few weeks: You will receive erroneous and misleading information.

Insights into the first half of 2012

Style Returns for YTD thru Q2/2012

Total US stock markets in the first half of 2012 delivered an 8.5% return, with growth stocks leading the way. This has been one of those unusual periods where the “stuff in the middle” (between value and growth, and between large and small) has not performed in line with value and growth, and large and small. Mid-cap stocks have underperformed both large and small, and core companies have underperformed both value and growth. I use Surz Style Pure® classification throughout this commentary.

Sector Returns for YTD thru Q2/2012

Read more articles by Ron Surz