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Capital Markets Performance Milos Vukovic, MBA, CFA Vice President, Investment Policy RBC Global Asset Management Inc. Between March 1, 2012, and May 31, 2012, the U.S. dollar rose against the euro, the pound and the Canadian dollar, while falling against the yen. Both the greenback and the yen benefited from their safe-haven status amid uncertainty in the Eurozone. Over the 12-month period ended May 31, 2012, the U.S. dollar rose versus the euro, the pound and the Canadian dollar, but declined against the yen. The 12-month return for the U.S. dollar was 16.4% against the euro, while the greenback fell 4.0% versus the yen. The ongoing crisis in Europe caused fixed-income markets to move in opposite directions during the quarter. Government bond prices in the U.S. and Japan rose, while in Europe they declined significantly. The Citigroup Japan Total Return Index climbed 4.9% in U.S. dollar terms due largely to the yen’s appreciation. The Barclays Capital Aggregate Bond Index, a broad measure of U.S. fixed-income performance, climbed 1.5%, and the DEX Universe Bond Index lost 2.3% in U.S. dollar terms. Meanwhile, the Citigroup Europe Total Return Index fell 6.2%, as the euro fell and large declines in Spanish, Italian and other peripheral-country bond prices overwhelmed a flight-to-safety rise in German bunds. The situation in Europe contributed to a 0.6% decline for the Citigroup World Government Bond Index (WGBI). During the 12-month period, Europe was the only region to post a decline in bond returns, with a 5.6% fall. Japanese government bonds performed best among fixed-income indexes with a 7.7% increase, followed by a 7.1% rise for the U.S. and a 2.8% return for the DEX. All developed-market equity markets posted losses during the three-month period, in many cases in the double digits. Eurozone stock markets performed the worst, with the MSCI France Index falling 17.2% and the MSCI Germany Index declining 15.7%. The MSCI U.K. Index lost 11.4%. Over the past year, European equity markets have sustained significant losses, in part due to the weak euro. The MSCI France fell 32.3%, followed by a 26.1% drop for the MSCI Germany and a 13.5% decline for the MSCI U.K. The S&P 500 Index outperformed other major stock markets, falling 3.5% during the quarter and 0.4% over the latest 12-month period. The S&P/TSX Composite declined 12.5% during the three-month period, beating the S&P/ TSX Small Cap Index’s loss of 19.5%. The S&P/TSX 60 Index declined 12.2%. The S&P 400 Index, a measure of the U.S. mid-cap market, lost 4.9% over the latest three months and 6.1% for the 12-month period, while the S&P 600 Index, a gauge of small-cap performance, dropped 4.8% over the three months and 4.4% over the 12-month period. Value and growth stocks had similar returns in the quarter, with the Russell 3000 Growth Index losing 3.7% and the Russell 3000 Value Index dropping 4.1%. Over the last 12 months, the growth index outperformed significantly, rising 0.6% versus a 4.2% decline for the value index. The MSCI Emerging Markets Index fell 15.2% during the latest threemonth period and dropped 20.3% in the 12-month period. All 10 global equity sectors declined over the quarter, but the range of performance was wide. The best performing sector was Consumer Staples, which lost 1.1%, followed by Health Care with a loss of 1.9%, and Telecommunication Services, down 3.3%. The worst-performing sectors were Materials, which lost 17.2%; Energy, which fell 16.4%; and Financials, which declined 11.8%. Over the 12-month period, the bestperforming sectors were Information Technology and Consumer Staples, and the worst-performing sector was Materials. The spread between the best and worst sectors was about 27 percentage points. SAMPLE 8 I The global investment outlook RBC INVESTMENT Strategy coMMITTEE Summer 2012
Capital markets performance • Milos Vukovic, MBA, CFA Equity Markets: Total Return 3 months (%) YTD (%) CANADA Periods ending mAY 31, 2012 USD 1 year (%) 3 years (%) 5 years (%) 3 months (%) S&P/TSX Composite (12.50) (4.29) (19.67) 8.48 (0.46) (8.22) (14.19) 6.42 S&P/TSX 60 (12.23) (4.17) (19.86) 6.00 (0.72) (7.93) (14.40) 3.99 S&P/TSX Small Cap (19.46) (7.51) (27.54) 15.37 (2.82) (15.51) (22.60) 13.18 Equity Markets: Total Return Current USD 3 months (%) 3 months (%) YTD (%) EXCHANGE RATES Periods ending mAY 31, 2012 U.S. Periods ending mAY 31, 2012 USD 1 year (%) YTD (%) 3 years (%) 5 years (%) 3 months (%) S&P 500 (3.53) 5.16 (0.41) 14.92 (0.92) 0.65 6.17 12.83 1 year (%) 3 years (%) CAD 1 year (%) CAD 1 year (%) 5 years (%) USD–CAD 1.0329 4.33 1.39 6.61 (1.82) (0.70) USD–EUR 0.8090 7.77 4.82 16.41 4.58 1.71 USD–GBP 0.6490 3.33 0.89 6.79 1.63 5.15 USD–JPY 78.3450 (3.50) 1.81 (3.95) (6.33) (8.44) Note: all changes above are expressed in US dollar terms Fixed Income Markets: Total Return 3 months (%) YTD (%) CANADA Periods ending mAY 31, 2012 USD 1 year (%) 3 years (%) 5 years (%) 3 months (%) DEX Universe Bond Index (2.31) 0.62 2.77 9.47 7.66 1.91 9.56 7.48 Fixed Income Markets: Total Return 3 months (%) YTD (%) U.S. Periods ending mAY 31, 2012 USD 1 year (%) 3 years (%) 5 years (%) 3 months (%) Citigroup U.S. Government 2.12 1.82 8.90 5.90 6.92 7.39 16.42 3.93 Barclays Capital Agg. Bond Index 1.46 2.33 7.12 7.12 6.72 5.86 14.19 5.18 Fixed Income Markets: Total Return 3 months (%) YTD (%) GLOBAL Periods ending May 31, 2012 USD 1 year (%) 3 years (%) 5 years (%) 3 months (%) Citigroup WGBI (0.57) 0.94 2.28 5.37 6.57 3.73 9.04 3.45 Citigroup Europe Government (6.24) (0.94) (5.57) 1.07 3.49 (0.67) 1.71 (0.57) Citigroup Japan Government 4.88 (0.36) 7.70 9.67 12.09 9.42 14.82 7.67 3 years (%) 3 years (%) S&P 400 (4.94) 5.90 (6.09) 18.87 1.72 (0.83) 0.11 16.71 S&P 600 (4.77) 3.64 (4.40) 18.71 0.67 (0.65) 1.91 16.56 Russell 3000 Value (4.10) 3.51 (4.24) 13.81 (3.50) 0.05 2.08 11.75 Russell 3000 Growth (3.74) 6.88 0.56 16.92 1.92 0.42 7.20 14.80 NASDAQ Composite Index (4.70) 8.53 (0.28) 16.80 1.66 (0.58) 6.31 14.68 Note: all rates of return presented for periods longer than 1 year are annualized Source: Bloomberg/MSCI The global investment outlook RBC INVESTMENT Strategy coMMITTEE Summer 2012 I 9 CAD 1 year (%) CAD 1 year (%) CAD 1 year (%) 3 years (%) 3 years (%) 3 years (%) SAMPLE
Page 1 and 2: The Global Investment Outlook RBC I
Page 3 and 4: Contents Executive Summary 2 The Gl
Page 5 and 6: Executive summary • Sarah Riopell
Page 7 and 8: Recommended Asset Mix Asset mix - t
Page 9: Recommended Asset Mix Balanced Asse
Page 13 and 14: Global Investment Outlook Eric Lasc
Page 15 and 16: Global Investment Outlook • Eric
Page 37 and 38: Global Fixed income markets • Soo
Page 45 and 46: Currency Markets Dagmara Fijalkowsk
Page 47 and 48: Currency markets • Dagmara Fijalk
Page 57 and 58: Regional outlook - U.S. • Ray Maw
Page 59 and 60: Regional outlook - CANADA • Stuar
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Regional outlook - Europe • Domin
Page 63 and 64:
Regional outlook - Asia • Yoji Ta
Page 65 and 66:
Regional outlook - emerging markets
Page 67 and 68:
Eric Lascelles Chief Economist RBC
Page 69 and 70:
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