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World markets review
Fourth quarter 2009
Stocks end year in positive territory
By December 2009, global equities gained back much of their losses from 2008. The Russell 3000® Index gained 5.37 percent in the fourth quarter to end the year at a 25.46 percent gain, and the Russell Global Index gained 4.14 percent in the fourth quarter to gain 33.85 percent for the year.
U.S. economy: Improvement is slow but steady
Recent data continues to display sometimes mixed, but largely improving, trends for the U.S. economy. Third-quarter Gross Domestic Product was revised down from an annual rate of 3.5% to a slower gain of 2.8% as of October 2009, as consumer spending and net exports proved not to be as robust as initially estimated. Weekly jobless claims in the fourth quarter 2009 continued to show slight improvement over third quarter 2009 numbers. The minutes from the Federal Open Market Committee meeting on November 3 and 4, 2009 suggest that monetary policymakers plan on maintaining the current accommodative stance on interest rates for an "extended period."
U.S. stocks: Corporate profits beat estimates; Help drive stocks up
Heading into the Thanksgiving holiday, the U.S. equity markets had enjoyed a relatively easy month, with the Russell 1000® Index climbing to its highest levels in more than a year. Trading in the United States on the normally placid Friday after Thanksgiving was significantly volatile, with the Dow Jones Industrial Average ultimately falling by more than 150 points. Fortunately, when the markets re-opened on November 30, buying resumed and continued at a healthy rate, resulting in fourth quarter gains of approximately 6% for the Russell 1000® Index. November and December economic data was largely encouraging and corporate profits for the third quarter had easily beaten analysts estimates. Oil and the dollar weakened, while gold reached record levels before fading at the end of December.
U.S. fixed income: It was a great year for bonds
Despite lower returns in the fourth quarter, U.S. fixed income investments generally had a great year overall. The Barclays Capital U.S. Aggregate Bond Index had a twelve month total return of nearly 6% at year-end 2009.
Non-U.S. stocks: Global stocks advance despite Persian Gulf debt crisis
Just as domestic U.S. investors were sitting down to their Thanksgiving turkeys, the global markets grew turbulent, as news of an unfolding debt crisis in the Persian Gulf emirate of Dubai caused a global sell-off of equity markets in the last few trading days of November.
Indeed, the credit concerns in Dubai exposed the raw nerves that perhaps too many investors ignored as enthusiasm around global stimulus measures helped power equity markets higher. Perhaps some investors thought these concerns may have been addressed with the mild pullback in trading during October. Yet in November, the news was mostly positive, enabling the equity markets to climb higher. Large cap stocks and the value style of investing led the gains.
Emerging markets: Developing markets make good gains in 2009
Emerging markets growth remained on an upward trajectory throughout 2009 according to the MSCI Emerging Markets Index, which had a one year return as of December 31, 2009 of nearly 75%.
Sources: Russell, Bloomberg
Copyright © Russell Investments 2010. All rights reserved.
Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company.
Russell Investments is the owner of the trademarks, service marks, and copyrights related to its indexes. The Russell logo is a trademark and service mark of Russell Investments.
Unless otherwise noted, the source in this material is Russell.
Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets.
Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.
Although stocks have historically outperformed bonds, they also have historically been more volatile. Investors should carefully consider their ability to invest during volatile periods in the market.
Bond investors should carefully consider risks such as interest rate, credit, repurchase and reverse repurchase transaction risks. Greater risk, such as increased volatility, limited liquidity, prepayment, non-payment and increased default risk, is inherent in portfolios that invest in high yield ("junk") bonds or mortgage backed securities, especially mortgage backed securities with exposure to sub-prime mortgages. Investment in non-U.S. and emerging market securities is subject to the risk of currency fluctuations and to economic and political risks associated with such foreign countries.
Investments in emerging or developing markets involve exposure to economic structures that are generally less diverse and mature, and to political systems, which can be expected to have less stability than those of more developed countries. Securities may be less liquid and more volatile than U.S. and longer established non-U.S. markets.
Non-U.S. markets entail different risks than those typically associated with U.S. markets, including currency fluctuations, political and economic instability, accounting changes, and foreign taxation. Securities may be less liquid and more volatile.
Indexes and/or benchmarks are unmanaged and cannot be invested in directly. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. Index performance is not indicative of the performance of any specific investment and is provided for general comparison purposes only. Index return information is provided by vendors and, although deemed reliable, is not guaranteed by Russell or its affiliates.
Barclays Capital U.S. Aggregate Bond Index: An index, with income reinvested, generally representative of intermediate-term government bonds, investment grade corporate debt securities, and mortgage-backed securities.
The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the U.S. market
Gross Domestic Product (GDP): The market value of the goods and services produced by labor and property in the United States.
The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market.
The Russell Global Index measures the performance of the global equity market based on all investable equity securities. The index includes approximately 10,000 securities in 63 countries and covers 98% of the investable global market. All securities in the Russell Global Index are classified according to size, region, country, and sector, as a result the Index can be segmented into more than 300 distinct benchmarks.
The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices. The MSCI information is provided on an "as is" basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the "MSCI Parties") expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.
MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets.
Securities products and services offered through Russell Financial Services, Inc., member FINRA, part of Russell Investments.
For information on the Financial Industry Regulatory Authority, go to www.finra.org.
First used January 2010
RFS 2775
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