Happy New Year!
December wrapped up the year positively for global equities. The S&P 500 Index rose 0.9% during the course of the month. Foreign stocks, as measured by the MSCI EAFE Index, continued their positive momentum with a 3.2% gain in December. Although the S&P 500 and MSCI EAFE were up similar amounts in 2012—15.8% and 17.9%, respectively—that fact belies the significantly superior short-term momentum foreign stocks have produced relative to domestic stocks since the summer, which is illustrated in the adjacent chart. As you know, we began allocating to select overseas markets—developed Europe and emerging Asia—in November. So far this move has paid off, and we foresee this trend continuing into 2013, as foreign stocks remain quite cheap relative to U.S.-based companies.
We are excited about this development because we have been in an environment in which U.S.-based large-cap stocks have been the dominant trend for the past few years, making the S&P 500 Index tough to beat as that is what the index represents. This nascent momentum in foreign stocks offers the strong possibility of breaking that trend…
Please watch the video below of our complete Market Analysis.