Structured Global Equity
Strategies
World Stocks Stage Strong Recovery
After a dismal first quarter, stock markets all over the world revived spectacularly in the following three quarters as cash-flush, bottom-fishing investors hunted for bargains. Developed-country markets, including the US, performed well, but emerging markets did even better. Oakwood clients participated fully in our global portfolio strategies.
For the year, the Dow Jones World Index (which excludes the US), soared 37% in US dollar terms. While the BRIC countries (Brazil, Russia, India, China) remain below all-time highs of 2007-08, they all staged remarkable gains, exceeding 80%, during the year. According to the Wall Street Journal, Russia’s RTS Index was up 129%, India’s Sensex was up 81%, China’s Shanghai Composite gained 80%, and Brazil’s Bovespa gained 83%. Even the laggards did well in 2009, with the worst performing major market, Japan’s Nikkei 225, gaining 19%.
This broad-based market recovery, biased towards emerging markets, suggests a reprise of pre-crisis performance, where international stocks did better than US stocks for several years. Much of that phenomenon was driven by a weakening American currency, which meant gains in local currencies increased when converted into dollars. This was evident as well in 2009, as Morgan Stanley’s international stock index increased 21% in local currencies which equated to 28% in dollar terms.
Despite the impressive recovery, at Oakwood we are cautious as corporate earnings remain depressed, and global economies continue to sputter below productive capacity. In addition, stocks are no longer cheap by many valuation metrics, though they remain substantially less expensive than at the market’s peak in October of 2007. Many of us believe a combination of reasonable valuations, imminent earnings recovery, and low interest rates means that it is too early to turn very cautious. While no one expects a repeat of 2009’s spectacular performance in 2010, at Oakwood, we expect global shares to deliver solid double-digit returns over the next few years.
Oakwood Conservative
Global Equity
- Balance of value and growth
as well as large, medium and small capitalization stocks
- Suitable for investors
seeking income and long term capital appreciation
Oakwood Moderate
Global Equity
- Has an increased bias towards
value by using multiple asset classes and greater emphasis on smaller
capitalization stocks than the conservative strategy
- Suitable for investors seeking above average returns through long term capital appreciation
Oakwood Aggressive
Global Equity
- Has a higher component
of non-US companies, as well as a greater value tilt and emphasis on
smaller capitalization stocks than the moderate strategy
- Suitable for investors with a higher tolerance for risk seeking higher returns through long term capital appreciation
