Fourth Quarter 2011: Market Review & Outlook
January 11, 2012
To close out 2011, our final commentary for the year covers the same themes we have been evaluating all year, that of global macro-economic uncertainties, in the form of the European sovereign debt crisis, US economic growth, and developing market inflation. In the fourth quarter, we had more room to be positive with encouraging economic data in the US and China. Europe, on the other hand, continued to keep pressure on equity markets, taking some small steps, but not providing the ultimate resolution that the market seeks.
Risky assets rallied in the fourth quarter, with US markets leading the way up, rising 11.8% (see Exhibit 1). European markets rose as well, albeit with more muted gains given the continued uncertainty surrounding the debt crisis. More cyclical sectors, such as energy, were the biggest beneficiaries of the rally, while gold ended the quarter down as investors sold off the safe haven asset.
The rise in the fourth quarter was not sufficient enough to lift global markets for the year. In the end, global equity markets fell by 5.0%1, led by non-US stocks (see Exhibit 2). US stocks acted as a safe haven, ending the year with a modest gain of 2.1%. For the year, cyclical sectors were particularly challenged as materials was the worst performing sector outside of financials, while utilities ended quite strong.
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 4Q & 2011 Capital Markets Review |
