Dear Clients and Friends of the Firm,
- In U.S. dollar terms, the MSCI All Country World Index, which serves as a proxy for global equity markets, was up 7.18% for the quarter. The solid advance came despite the financial crisis in Europe, political wrangling over budget talks in the U.S. and slowing economic growth in China and other emerging markets. For the full year, the Index struggled, closing down -7.4%.
- The Barclays Capital Global Aggregate Bond Index, which represents global bond markets, posted a barely positive 0.23% gain for the quarter. In a reversal of the third quarter’s results, investors embraced risk, driving up prices for riskier assets. Emerging-market debt and high-yield bonds outpaced their more conservative counterparts. For the full year, the Index gained 5.6%.
What’s the Impact to Compass Capital and SEI’s Strategies?
- In the fourth quarter, we saw sovereign debt concerns in Europe continue to escalate. Italy and Spain joined the growing list of troubled countries as Europe moved toward recession. Emerging markets raised concerns too as the pace of growth slowed. While economic indicators improved in the U.S., efforts to reign in the nation’s ballooning debt failed. The end result was a continuation of heightened market volatility.
- Equity markets shook off the concerns, and the fourth quarter saw a sharp rotation out of defensive sectors and into growth sectors. In the fourth quarter, every sector in the MSCI All Country World Index posted gains with Energy and Industrials providing the best results in U.S. dollar terms. This was a complete reversal from the third quarter in which all sectors showed losses.
- SEI’s results were once again in line with the global markets. Their equity Funds in general had a solid quarter in a challenging year. Their fixed-income Funds continued to deliver competitive results for the quarter and the year, highlighting the benefits of diversification across asset classes. During the closing months of the year, they began to position portfolios for the year ahead. In the portfolios over which SEI has discretion, they neutralized their overweight position to stocks versus bonds following stock market gains.
Outlook and Perspective:
- Looking ahead, We favor U.S. stocks over international stocks based on the relative strength of the U.S. economy. U.S. large caps, in particular, appear attractive. Within fixed income, they favor an overweight to high-yield versus investment-grade as relative-value opportunities are more attractive in the high-yield space.
In the weeks and months ahead, we expect to see continued growth in the U.S. and Canada with a mild recession in Europe. Geopolitical factors remain a concern, and we expect a bumpy ride. We will continue to monitor the markets and manage your investment strategies accordingly.
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the Funds or any stock in particular, nor should it be construed as a recommendation to purchase or sell a security, including futures contracts. There is no assurance as of the date of this material that the securities mentioned remain in or out of SEI Funds.