As we kick off 2013, it’s time again for my annual look back at the investment calls I got right and wrong during the previous year.
Back in December 2011, I expected 2012 to be characterized by sluggish but positive US economic growth, a modest contraction in Europe, a rebound in emerging markets and little risk of inflation.
As such, from a big picture perspective, I advocated that investors overweight equities relative to bonds, with an emphasis on high-dividend mega cap stocks, smaller developed markets and emerging market equities. On the fixed income side of the portfolio, I remained a fan of corporate bonds, particularly investment grade. And nearly every week last year, I also made more specific calls about certain segments and markets.
Though 2012 played out largely how I expected, as I explain in my recent Market Perspectives paper, my calls weren’t perfect.
Among the calls I got right, global equities did outperform bonds last year. And on the equity side, larger was better with US mega caps outperforming large caps, which in turn outperformed small caps. Meanwhile, an equally weighted basket of smaller developed “CASSH” countries outperformed global stocks, emerging markets modestly outperformed developed markets and my central theme on the bond side—credit over duration—was correct.