2012 Market Preview

January 11, 2012

Reflecting back on 2011 does not elicit a lot of warm and fuzzy feelings.

News highlights include a downgrade to the U.S. credit rating, political gridlock in Washington D.C., ongoing sovereign debt issues in Europe, and a stubborn lack of economic growth. Predictably, these major news items took a toll on the capital markets, with U.S. equities mostly down for the year, and non-U.S. equities considerably worse off than their U.S. counterparts. Not surprisingly, the ongoing frustration (and dispersion) of equity markets pushed investors to the bond market, as rates – contrary to popular sentiment one year ago – fell yet again, thus making the year a profitable one for fixed income investors. Moving outside of the traditional capital markets, alternative asset classes had more of a mixed 2011: hedge funds again disappointed, while real estate and private equity continued their recoveries from the abyss known as 2008 – 2009.

But enough about 2011 – it is 2012 and investors are less concerned about what happened, and more interested in what the coming year holds for their portfolios. In the following articles, we will take a closer look at critical issues for each asset class in 2012. Each article contains insightful analysis and key themes to monitor over the coming year, themes which will underlie the actual performance of the asset classes covered. Articles are offered for the following asset classes: fixed income, U.S. equities, non-U.S. equities, hedge funds, real estate, private equity, and infrastructure. As a backdrop to the capital markets, we examine some crucial macroeconomic topics as they pertain to the U.S. economy.

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