Looking Back While Planning Ahead

Looking Back While Planning Ahead

Looking Back While Planning Ahead 481 530 AMA Team

Screen_Shot_2012_12_27_at_9.39.57_AMFrom all of us at Austen Morris Associates, we hope that you all had a wonderful Christmas and wish you the very best for the holidays! This Money Matters is the last for 2012 and we’ll be back in the New Year ready to see what 2013 will bring us. In this episode let’s take a quick review of 2012 and a sneak peek into what may lie ahead…
In 2012 we were faced with issues out of the Euro zone, more US debt issues, and more concerns out of the emerging markets, but despite this, heading into the last week of the year most global indices are up. The only looming issue remains that of the US Fiscal Cliff which will hopefully be resolved in the next few days. Regardless of the issues faced in 2012, equities surpassed expectations and we’ll likely see them finish the year well within the green, while on the other end commodities and resources didn’t fare as well. These are however tangible goods and essential for any economy so don’t expect them to disappear anytime soon as we see many traders favor the commodity and resource sectors for their current value.
In preparation for 2013 and what’s to come, let’s look at some of the more recent government actions to get an idea of their thinking. Screen_Shot_2012_12_27_at_9.42.46_AM 2013 International MarketsThe US injected $40 billion as part of their QE approach to boost the economy in September of this year, on top of the billions already spent, while Japan announced in early December that more QE is also likely to come after a decade of attempting to spend their way out of debt.
Congress has announced it will work through to the December 31 deadline to resolve US Fiscal Cliff matters, and although this appears to be an attempt at some resolution, we still believe (as we’ve been saying for a few weeks now) that it is only likely to be a temporary band aid rather than viable solution. There are also the rumours that this meeting may well also include a delay on the Budget Ceiling. This would be a nice addition as without it the US would certainly be hitting the debt ceiling in 2013 putting markets back into a similar situation they’re in now – which is a bit of a ‘limbo’ – and this will continue to be a vicious cycle which requires the US politicians to come to an agreement on a decision!
I know what you are asking, this government spending issue is not only prevalent in the USA, but so too in Europe, Asia, and all around the globe, isn’t it? Indeed it is. And this is seen through governments raising ages at which retirees can collect pensions, rising taxes, less benefits and austerity cuts, and so on. And with this, it sure makes me glad that I have taken my retirement planning into my own hands instead of relying on government pensions for future income!
Developed Markets vs. Emerging MarketsScreen_Shot_2012_12_27_at_9.55.46_AMHeading into 2013 I think we can expect much of the same and as long as the US Fiscal Cliff gets resolved, then I wouldn’t be surprised to see a strong start to the year with a continual rise on most equities. Emerging markets have lagged developed markets for the most part, so expect to see some good value in emerging equities. I wouldn’t discount the commodity or energy sectors either as I do believe that a large amount of value still remains in them and they have yet to see half the rise of equities throughout the year. And although they may not come out as fast or strong, they will be there, and will continue to be there so be sure to include them in any balanced portfolio.
With that, we’d like to wish you all a happy and prosperous New Year and we look forward to being back in the new year with more Money Matters! Please note that during the New Year’s Holiday, Austen Morris Associates’ offices will be closed from December 31st 2012 – January 3rd 2013 with normal business operations resuming from 4th January 2013.
For more updates on the world financial news please visit our Weekly Global Economic Outlook.
Co-Head of Portfolio Management,
Darren Cox
Austen Morris Associates Wealth Management & Investment Team
www.austenmorris.com

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