I just updated our website with the portfolio performance numbers through the end of 2010.
US stocks turned in pleasing results for the full year in 2010, with investors earning significant rewards for the equity, small cap and value risk factors. But, capturing the market rate of return required plenty of patience: eight months into the year the S&P 500 Index was still down 5.8% and the tepid economic recovery appeared to put a lid on any significant upturn in prices. Nevertheless, stock prices surged over the subsequent five months and the S&P 500 ended the year at 1257.64, up 12.78% (price only), recouping all of its losses since the collapse of Lehman Brothers on September 15, 2008.
Results were generally similar in non-US markets, with 37 out of 45 countries tracked by MSCI achieving positive returns in both local and US dollar terms. The US ranked 22nd in dollar terms and 23rd when expressed in local currency. Peru and Thailand vied for the top spot (up 53% and 56%, respectively) while Greece and Spain landed in the cellar.
Throughout the year, investors had no trouble finding reasons to fret about the future and remain on the sidelines:
• A prominent researcher who had predicted the Great Recession was expecting the "biggest co-ordinated asset bust ever."
• An Economist cover story in January warning of asset price bubbles asserted that US stocks were "nearly 50% overvalued."
• The "January Indicator" signaled poor stock market performance for the remainder of the year.
• A tragic drilling rig explosion in April produced a disastrous and hugely expensive oil spill in the Gulf of Mexico.
• A bewildering "flash crash" on May 6th saw the Dow Jones Industrial Average plummet over 1100 points in the course of a few frantic minutes.
• Hundreds of bank failures revealed continued weakness in the financial system.
• A divided Congress passed a complex and potentially expensive healthcare reform bill.
• Residential housing remained weak, with monthly sales of new homes falling at one point to the lowest level since tracking was initiated in 1963.
• An obscure technical indicator dubbed the "Hindenburg Omen" generated a "sell" signal in August.
• North Korea launched a deadly artillery barrage in November against South Korea's Yeonpyeong Island.
• A financial crisis with no clear solution gripped governments in Greece, Portugal and Ireland.
But, for those investors who stuck to a plan, the results were very good. The all equity Talis 100 portfolio model achieved a 21.29% return for the year, net of our highest advisory fee. To view the rest of our performance data and important disclosures, click here.