Halftime report 2013
June 30th data is in so it’s that time again for my annual halftime report. Here are some of this year’s top stories
Bond returns remain soft
Bonds have enjoyed a really long bull run since the peak of interest rates in 1981. When interest rates fall, bond prices increase which makes bonds really attractive when interest rates fall. The problem is we have seen interest rates fall to really low levels, which means the bond run has to slow down.
Given that interest rates bottomed out, we saw the bond market soften and return to more normal returns in 2012. That pattern has continued and for the first 6 months, bonds have posted a negative return of -1.68%. In fact, for the first 6 months of the year, bond returns have been negative in 3 of the 6 months:
- Jan -0.74%
- Feb +1.00%
- Mar +0.44%
- April +1.14%
- May -1.46%
- June -2.03%
Here are some returns for other asset classes
- Cash +0.48%
- DEX Bond Universe -1.68%
- S&P/TSX REITs -5.58%
- TSX Composite -0.88%
- S&P500 ($Cdn) +20.59%
- MSCI EAFE ($Cdn) +10.67%
- MSCI World ($Cdn) +15.3%
Strengthening US dollar helps foreign investment
The currency continues to play a big role in affecting investor returns. In the first 6 months of the year, the S&P500 (in $US dollars) returned +13.8%. When the performance is converted to Canadian dollars, the returns jump to +20.59% because the US dollar has strengthened over the Canadian Dollar
When we look at the Canadian Dollar compared to other currencies, our dollar has actually held up reasonably well. For example, the MSCI EAFE index in local currencies had decent growth with a +11.39% gain. When converted to Canadian dollars, the return adjusted to +10.7%.
Markets around the world
For the most part, markets around the world did well. The top performers in the first 6 months of 2013 (In local currency) were:
- Japan +32.6%
- Far East +25.1%
- Pacific +19.2%
- US +12.5%
- Switzerland +12.2%
At the other end of the spectrum, only 7 markets lost money in the first 6 months of 2013:
- Italy -9.8%
- Austria -7.5%
- Spain -6.6%
- Hong Kong -2.9%
- Portugal -2.6%
- Singapore -1.5%
- And Canada -0.9%
Here’s the total list from MSCI (in local currency)
| MSCI Index | 6 mos | 1 Yr | 3 Yr | 5 Yr | 10 Yr |
| JAPAN |
32.59% |
49.02% |
10.51% |
-3.37% |
2.62% |
| FAR EAST |
25.06% |
40.71% |
9.23% |
-3.07% |
3.17% |
| PACIFIC |
19.24% |
34.38% |
7.64% |
-2.92% |
3.40% |
| USA |
12.50% |
17.98% |
16.07% |
4.61% |
5.28% |
| SWITZERLAND |
12.21% |
26.32% |
7.36% |
1.77% |
4.77% |
| WORLD |
10.33% |
18.78% |
10.62% |
1.23% |
4.27% |
| EAFE |
8.95% |
21.26% |
5.69% |
-1.84% |
3.24% |
| IRELAND |
8.79% |
5.46% |
6.04% |
-14.62% |
-7.30% |
| UNITED KINGDOM |
5.16% |
11.25% |
8.05% |
1.98% |
4.22% |
| NETHERLANDS |
5.09% |
20.08% |
4.84% |
0.69% |
3.59% |
| AUSTRALIA |
4.25% |
18.51% |
3.74% |
-1.33% |
5.06% |
| SWEDEN |
3.99% |
13.82% |
4.36% |
5.95% |
8.67% |
| EUROPE |
3.85% |
15.21% |
5.03% |
-0.98% |
3.40% |
| BELGIUM |
3.48% |
16.05% |
9.59% |
-1.00% |
2.15% |
| NEW ZEALAND |
3.40% |
18.49% |
9.70% |
1.44% |
0.06% |
| FRANCE |
2.68% |
16.67% |
3.44% |
-2.36% |
2.54% |
| GERMANY |
1.85% |
21.18% |
7.12% |
0.01% |
6.08% |
| FINLAND |
1.63% |
21.97% |
-2.94% |
-10.15% |
-2.29% |
| GREECE |
0.81% |
22.54% |
-29.13% |
-33.38% |
-12.75% |
| NORWAY |
0.81% |
7.41% |
7.22% |
-5.58% |
8.79% |
| EMU |
0.62% |
16.00% |
2.09% |
-4.10% |
1.96% |
| DENMARK |
0.02% |
10.91% |
8.10% |
3.66% |
11.14% |
| SINGAPORE |
-1.51% |
6.62% |
1.64% |
-0.35% |
7.08% |
| ISRAEL |
-1.51% |
-5.28% |
-10.66% |
-6.34% |
1.55% |
| CANADA |
-2.24% |
4.98% |
1.72% |
-3.93% |
5.84% |
| PORTUGAL |
-2.58% |
16.54% |
-7.26% |
-8.65% |
-1.28% |
| HONG KONG |
-2.86% |
14.16% |
7.43% |
2.29% |
9.52% |
| SPAIN |
-6.57% |
6.93% |
-7.42% |
-9.29% |
0.49% |
| AUSTRIA |
-7.51% |
12.52% |
-2.18% |
-16.08% |
0.21% |
| ITALY |
-9.80% |
1.16% |
-7.81% |
-12.25% |
-4.86% |
Canadian stock market
In Canada, there was a big variety of returns among different sectors which highlights the importance of sector diversification.
As you can see from the chart below, the Health care sector did very well in the first half of 2013 with a +20.6% return. At the other end of the table, the Materials sector lost 9.7%
| Fund Name | 6 Mth Ret |
| S&P/TSX Capped Health Care TR |
20.6% |
| S&P/TSX Capped REITs TR |
14.6% |
| S&P/TSX Capped TeleServices TR |
14.4% |
| S&P/TSX Capped Industrials TR |
9.6% |
| S&P/TSX Capped Real Estate TR |
9.2% |
| S&P/TSX Capped Financials TR |
6.0% |
| S&P/TSX Capped Cons Staples TR |
4.7% |
| S&P/TSX Capped Info Technology TR |
2.6% |
| S&P/TSX Capped Utilities TR |
1.9% |
| S&P/TSX Capped Cons Disc TR |
-0.9% |
| S&P/TSX Capped Energy TR |
-1.2% |
| S&P/TSX Capped Diversified Mining TR |
-3.4% |
| S&P/TSX Capped Materials TR |
-9.7% |
My final thoughts
As much as I enjoy looking into the data, I don’t see how anyone can make any proper predictions or forecasts about what is going to happen over the next 6 months, year, 3 years or more.
I hope you enjoy the read and the information but don’t get too caught up in trying to make changes to your portfolio based on this article.
