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Global markets gain 14.07 per cent in 2012 to counter 2011 decline of 10.67 per cent

2012 year was marked by persistent low interest rates, as central banks attempted to stimulate economies and postponed worrying about possible inflation, says Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

European debt issues received enough bandages (and bailouts) to sustain them, with the bulk of the pain yet to be felt by individuals; the translation is more discomfort for politicians and the market. Recessions selectively returned, with unemployment remaining a global problem.
In the post-US election period, the fiscal cliff was the key issue impacting global markets, with the US debt issue returning in the last few days of the year. At this point, the US is poised to go down the fiscal slope, thanks to what appears to be a last-minute deal to avoid the fiscal cliff, with the exact impact still unknown – although higher taxes and less spending are still in the mix. The markets, while affected, have managed to hold on to their gains – and given the progress in the global economy over the year – appear to have gained some footing. The test, of course, will come as austerity plans go into place. US uncertainty is the issue of the day, but as the slope continues its slow downward slide (as measures go into effect), politicians could alleviate the immediate difficulty, which – while a long way from a solution – is typically accepted in the markets (more bandages).
In December, 43 of the 46 global markets posted gains, resulting in a 2.39 per cent increase globally; excluding the US’s sub-par 1.05 per cent gain, the gain would have been 3.49 per cent. Developed markets accounted for 25 (Israel was off 4.65 per cent) of the 43 gains, with emerging markets having 18 gainers and two decliners (Hungary declined 2.46 per cent and Morocco fell 3.55 per cent). Continuing to bolster developed markets were rebounding European markets, with Portugal up 10.55 per cent and posting a positive 2012 return of 3.03 per cent, and Greece, which was up 9.12 per cent in December, and left its 2012 gain at an impressive 24.66 per cent, but still off 48.07 per cent for the two-year period. Overall, developed markets added 2.07 per cent for the month, with the ex-US gain being 3.14 per cent.
For the year, developed markets added 13.91 per cent (13.73 per cent ex-US), with their two-year return now positive at 4.58 per cent (but still off 3.20 per cent ex-US). Emerging markets – while more mixed – did better overall, gaining 4.85 per cent for the month, and ending the year up 15.27 per cent, outperforming developed markets. The emerging market two-year return, however, remains solidly in the red at -11.15 per cent, as 2011’s loss continues to show its impact.

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