John Gorlow
| Mar 05, 2012
Month In Review
Next week marks the third anniversary of the bear market low (March 2009). The S&P 500 posted another broad-based gain, adding 4.06% in February, for an 8.59% gain YTD. It is the index’s best start since realizing 17.36% in January & February 1987. The S&P Small Cap 600 underperformed the mid and large-cap indices in February, but over the trailing ten-year period, the S&P Small Cap 600 has returned more than twice as much as the S&P 500 (7.68% versus 3.52%).
The 10-year U.S. Treasury increased 18 bps, closing at 1.98% YTM (compared to January 2012, 1.80%; year-end 2011, 1.87%; year-end 2010; 3.29%, and year-end 2009, 3.84%). The 30-year U.S. Treasury increased to 3.09% YTM (compared to 2.94%, 2.90%, 4.34%, and 4.63%, respectively).
International/Developed Markets broadly advanced in February with 44 of the 46 markets posting gains for the month and all 46 markets reported positive YTD gains. When combined with January’s bull markets, International/Developed markets have already earned back all of the 2011 losses. Emerging markets added 6.62% on top of January’s 11.56% gain; posting 18.95% YTD gain. All 20 Emerging Markets posted positive numbers for the month. Though the surge has remained strong for the Emerging Markets, they have still not overcome their 2011 losses. The one-year return now stands at -4.49%.
What High I.Q. Investor’s Do Differently? As reported by Robert Schiller (Yale) in the NYT on 02/26/12, people with relatively High I.Q.’s typically diversify their investment portfolios more than those with lower IQ scores and invest more heavily in the stock market. They also tend to favor small-capitalization stocks, which have historically beaten the broader market, as well as companies with high book values relative their share prices. These preferences by those with higher IQ scores have resulted in portfolios with better risk-return profiles than their lower-scoring peers. This is not because the people with high I.Q.’s have a monopoly on stock picking genius; rather, they tend to follow the basic rules of successful investing.