With the plethora of unwelcome news that generated the 2012 headlines, one might have expected equity markets to have been a bad place to be last year.  But as so often happens in investing, perception and reality can be very different.  A recent post from Weston Wellington at Dimensional Fund Advisors lays out in crystal clear detail how different they can be…

2012: The Year It Didn’t Happen
Weston Wellington, Down to the Wire

Judging by the headlines in the financial press, investors spent much of the past year anxiously awaiting one calamity after another that failed to occur. The plunge off the so-called fiscal cliff was averted. The euro zone did not fall apart. China’s economy and stock market did not crash. The bond market did not implode. The re-election of President Barack Obama did not derail the US market. The “flash glitch” in early August did not lead to further trading disruptions. Doomsday did not arrive on December 21, as some interpreters of the Mayan calendar suggested it would.

Instead, the belief that owning a share of the world’s businesses is a sensible idea appears to be alive and well, despite suggestions from some observers that the “cult of equity” is dead. For the year, total return was 16.42% for the MSCI World Index in local currency, and 16.00% for the S&P 500 Index. Among forty-five global stock markets tracked by MSCI, only three posted negative results in local currency (Chile, Israel, and Morocco), and twelve markets had total returns in excess of 25%, with Turkey leading the pack at 55.8%. Although much of the financial news over the past year highlighted Europe’s fragile financial health, most of the region’s equity markets outperformed the US, including Austria, Belgium, Denmark, France, Germany, the Netherlands, Sweden, and Switzerland. For US dollar-based investors, results were further enhanced by a modest decline in the US dollar relative to the euro, the Danish krone, and the Swiss franc.

As is so often the case, earning the rewards offered by the world’s capital markets may have required a combination of discipline and detachment that eluded many investors.

2012 Index and Country Performance

Total return (gross dividends) for 12-month period ending December 31, 2012.

MSCI Index Local Currency USD
WORLD 16.42% 16.54%
WORLD ex USA 16.73 17.02
EAFE 17.89 17.90
TURKEY 55.80 64.87
EGYPT 54.66 47.10
BELGIUM 38.56 40.72
PHILIPPINES 38.16 47.56
THAILAND 30.84 34.94
DENMARK 30.37 31.89
GERMANY 30.07 32.10
INDIA 29.96 25.97
HONG KONG 28.01 28.27
POLAND 27.05 40.97
AUSTRIA 25.07 27.02
SOUTH AFRICA 25.07 19.01
COLOMBIA 23.87 35.89
SINGAPORE 23.54 30.99
NEW ZEALAND 23.28 30.38
CHINA 22.85 23.10
JAPAN 21.78 8.36
FRANCE 20.93 22.82
AUSTRALIA 20.77 22.30
MEXICO 20.09 29.06
PERU 19.73 20.24
SWITZERLAND 18.91 21.47
SWEDEN 17.11 23.41
USA 16.13 16.13
FINLAND 14.71 16.50
KOREA 12.89 21.48
TAIWAN 12.84 17.66
HUNGARY 11.86 22.79
INDONESIA 11.83 5.22
ITALY 11.72 13.46
NORWAY 11.63 19.70
UNITED KINGDOM 10.24 15.30
MALAYSIA 10.23 14.27
BRAZIL 10.14 0.34
RUSSIA 9.73 14.39
CANADA 7.46 9.90
IRELAND 4.66 6.29
GREECE 4.11 5.73
PORTUGAL 3.36 4.98
SPAIN 3.12 4.73
CHILE –0.14 8.34
ISRAEL –6.24 –3.91
MOROCCO –12.63 –11.48

Past performance is no guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.

MSCI data copyright MSCI 2013, all rights reserved. S&P data are provided by Standard & Poor’s Index Services Group.