Radnor News

2011 was a volatile and disappointing year. Optimism at the beginning of the year was replaced with fear, due to uprisings in the Arab world, an earthquake and tsunami in Japan, the downgrading of U.S. debt, and renewed concerns surrounding European sovereign debt.

While the S&P 500 ended the year up 2.1% (due to its dividend yield), small-cap stocks fell -4.2%, foreign stocks fell -12.1% and emerging markets stocks fell –18.4%. Bonds performed well, as the Barcap Aggregate Bond Index was up 7.8%. Treasuries again performed well, as the yield on the 10- year Treasury fell from a high of 3.75% in April to 1.89% at year-end. Gold performed well, up +9.6% (although ending the year at $1,531, significantly off its high of $1,895 in September), while commodities declined -13.3% (DJ-UBS) and hedge funds were down slightly (-5.5%, HFRI Fund of Funds).

Fear returned in the 3rd quarter due to a mixture of slowing global growth, Europe’s sovereign debt issues, and the U.S. debt downgrade. The S&P 500 declined -13.9% for the quarter and is down -8.7% YTD. Small-cap stocks, international stocks and emerging markets stocks did even worse in Q3, falling –21.9%, -19% and –22.6%, respectively. Bonds rallied, as the yield on the 10-year Treasury, which started the quarter at 3.18% (and was expected to move higher as the economy gradually improved) fell to under 2%. The Barcap Aggregate Bond Index was up 3.8% for the quarter (and the yield down to 2.35%), although high yield bonds were down -6%. Gold was up +7.6%, while commodities declined -11.3% (DJ-UBS).