2013 Global Market Review

精英理财Aurora

Majority of the global equity market had enjoyed tremendous gains in 2013, despite in the first half of the year many were still worried about major market correction and disbelieve that economy has recovered. Here are a list of major events happened in the financial market during 2013.

1.      Japan market soared since the beginning of 2013 after Dec 2012 new PM was elected and implemented favorable economic policies.

2.      March 5, Dow Jones first time broke its record high since Oct 12, 2007.

3.      March 28, S&P first time broke its record high since Oct 9, 2007.

4.      June 19, Ben Bernanke spoke about QE Taper, caused a mini earthquake in the market. In order to calm the market the Fed had to postpone the QE Taper.

5.      July 11, Nasdaq overtook S&P, unveil the curtain of tech sector heating up.

6.      Prior to October US 17-days government shutdown, the debt ceiling debate in September caused another market drop, though this is just political noise, not real economic issue.

7.      During the third quarter, Eurozone moved out of recession, economic expansion continued in the fourth quarter, with the only exception of growing concerns in France and S&P cut France’s credit rating to AA.

8.      Nov 15, China unveiled the boldest reform in decades after economic slowdown, embarking on a slow structural reform journey. Throughout the year Hang Seng index is mostly flat.

9.      Other emerging markets face challenges in large current account deficit, emerging market as a whole performed very poorly.

10.    Commodity continued to underperform other asset classes, due to strengthening of US dollars and booming equity market.

11.    Both US dollars and Euro strengthened, with Euro slightly outperformed.

12.    With the anticipation of QE Taper, long term rate already rose; short term rate is still very low and expected to be rising very slowly. Longer duration bonds all lost money, shorter duration bonds with negative or near zero return. Only corporate bonds made positive gains, especially lower grade ones.

Major index one year returns in Canadian dollar ending Dec 27, 2013:

S&P/TSX             8.81%

S&P500              39.55%

DJIA                   35.22%

FTSE100             24.99%

CAC40                30.4%

DAX                     40.3%

Nikkei                   37.83%

HangSeng           10.39%

Currency one year returns against CAD ending Dec 27, 2013:

US$        7.6%

Euro       11.68%

Yen        -11.94%

Notice, Nikkei index had better returns than European index, but due to weakening of Yen and strengthening of Euro, the return in CAD looks not as impressive. So when investing in a weakening currency, it’s better to have a currency hedge to protect return. Both US and European returns looked more impressive than the returns in their domestic currency because of the strengthening of the currency.