Bull markets run all around the world

Finally, the time has come when markets all around the world have posted impressive returns for a calendar year. It seems like such a long time since being able to say that all of the markets measured by Morgan Stanley Capital International (MSCI) boasted positive returns in 2003 with only one exception. Finland was the only market in the world with a negative 12-month return (-2.87%).

In 2003, the MSCI world index boasted an impressive 22.76% return. That’s a sharp turnaround given that the MSCI world index was negative for the last 3 years:

Year MSCI World Index
2003 22.76%
2002 -25.20%
2001 -15.25%
2000 -10.78%
1999 26.27%

Not only was the index positive, but it was also a broad-based return where 19 of 23 countries had double-digit returns. At the top of the list was Norway with 38.14%. Greece was the second-best market with a 35.79% return. Rounding out the top three was Germany with a 33.23% return. Sweden, Hong Kong, and Singapore all have returns greater than 30.0% in 2003. Canada ranked in the top ten in the tenth spot with a very respectable 24.61% return. This was the 23rd time since 1920 that the TSX has posted a calendar return greater than 20%.

What’s in store for 2004?

The question for 2004 is will the bull market continue to rage? Or will the bear market make a return? The truth is that I do not have a better guess than anyone else. As much as we hope there is some predictability to the outcome of markets, the fact remains that markets are unpredictable. The problem is that market commentators and financial pundits are expected to give their predictions. Yet the investment industry continues to promote that past performance is no indication of future performance.

So, rather than try to guess what the market outcome will be, here are some of my thoughts on general trends in the world of stock markets.

  1. Information continues to be overabundant. The fact is there is no shortage of information. Information is everywhere and too much information has led to increased confusion and complexity. The challenge today is not trying to find information but rather trying to filter and sort through the information that is there. This is a significant challenge in the future of investors.
  2. Technology has contributed to volatility. Stock markets today are more volatile than ever. Part of the problem is not only the excessive amount of information but also the speed at which information travels. Technology has allowed investors to react to information faster than ever and even make trades at the touch of a few buttons in the comfort of their homes. Investors are going to have to face the fact that non-guaranteed investing will potentially bring more volatility to their net worth.
  3. The definition of the long term has changed. While the industry continues to promote the merits of long term investing, investors continue to lose their patience faster in our ‘now’ society of immediate benefits and immediate returns. Studies have shown that investors are holding their stocks and mutual funds for a shorter period. Technology has made it so easy to trade that it’s harder and harder to hang in for the long term.

My two cents

With these three major trends in the world of markets, it has never been more important to pay attention to some key investment principles. Make sure you properly diversify your investments. Start with a plan and continue with discipline. Take the time to understand risk. Be patient and remember time is the key to success. If it is too good to be true, it probably is. Finally, make sure you do your homework with research. Remember that trends come and go but principles of investing always stand the test of time.

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