Financial halftime report for 2004

Summer is often a time to spend time with family and friends and to get away from the hustle and bustle of the financial world so here’s a quick glimpse of the markets in the first six months of 2004.

Canada is lead by technology

Here in Canada, the TSX Composite finished the first 6 months up 4.8%. The first 3 months were particularly strong but the second quarter was down slightly with a -0.31% return. Of the first six months, 4 months were positive and only March and April were negative.

If we take a look at the sub-sectors of the TSX, Information Technology was the star performer for the first two quarters with a whopping 44.6% return. At the other end of the spectrum, Gold was the worst performer at -12.6%. This is a complete reversal from 2002. Maybe it’s true that everything goes in cycles and what comes up the most goes down the most and vice versa.

TSX Sub sectors (as of June 30, 2004) 6 Mth Ret
S&P/TSX Capped Information Technology 44.60
S&P/TSX Capped Energy 9.30
S&P/TSX Capped Financial 7.60
S&P/TSX Capped Consumer Discretionary 5.20
S&P/TSX Capped Energy Trust 3.40
S&P/TSX Capped Income Trust 2.70
S&P/TSX Capped Health Care 1.60
S&P/TSX Capped Real Estate 1.50
S&P/TSX Capped Consumer Staples 0.50
S&P/TSX Capped REIT Index 0.40
S&P/TSX Capped Diversified Mining -2.00
S&P/TSX Capped Industrials -3.20
S&P/TSX Capped Materials -5.00
S&P/TSX Capped Telecom Services -5.30
S&P/TSX Capped Utilities -6.00
S&P/TSX Capped Gold -12.40

Source: Morningstar / Paltrack

US dollar rebounds

In the US, the markets also posted a positive return in the first six months with 2.25% of growth as reported by MSCI (in the US dollar). However, for Canadian Investors, the US dollar rebounded slightly (+3.7%) to help boost some of the returns to Canadians. Overall, most Canadian investors should have done well with US stocks.

The world is moving together

At one time, it was incredibly important to invest around the world because of the diversification aspects of no-correlated markets. In simpler terms, the world did not always move together. When one market was up, another one was down. Today, because of technology and globalization, world markets are moving closer in tandem.

In fact, if you look at the 24 developed markets as reported by MSCI, 23 of them were on the plus side in the first 6 months of the year. Only Finland was negative with a -5.95% return.

The top three markets in the world were Austria (27.7%), Norway (18.9%) and Ireland (15.8%). In fact, Europe did very well in the first six months. However, according to MSCI, the best place from a global perspective was the Pacific and Far East regions boasting double-digit returns.

What about mutual funds?

In the mutual fund industry, there are 31 categories as reported by the Investment Funds Institute of Canada (IFIC). The top-performing category in the first half of 2004 was Japan with an amazing 16.2% return. Maybe Japan has finally turned the corner after an incredibly long bear market run. The top three categories were Japan (16.2%), Global Healthcare (7.9%) and International Equities (6.6%). All returns are sourced from Morningstar / Paltrak as of June 30, 2004.

At the other end of the spectrum, there were only two categories that posted average negative returns. The worst category was Precious Metals with a -20.9% return.

The last word

Remember that what’s past is past. Or, as the investment world puts it “Past performance is no indication of future performance”. It’s interesting to see what has done well and what has not done well and then to look at these categories to see how they relate back to your portfolios. Keep your portfolios diversified and your eye on the ball. The only way we will know what happens for the rest of 2004 is to wait until the year-end report for 2004.

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