KNOWLEDGE CENTER

Knowledge Center Archive

Oct
19
2012

Q3 2012 Global Economic Market Review

By Kevin P. Barr

The third quarter represented yet another twist in the roller coaster ride that investors have been on this year. The first quarter saw a broad-based rally as investors took advantage of historically low equity valuations and the promise of central bank stimulus. This investor confidence didnít last long as concerns over European and Chinese economies prompted investors to take profits and look for safety in the second quarter. By the beginning of the third quarter, the markets had erased the yearís gains and were in the red.

As the quarter developed, we began to see signs of improved economic growth in the United States and stimulus commitments from the Chinese government and central banks in Europe and the U.K. By quarter end, investors had recommitted capital to the markets and most major indices ended in positive territory.

SHOW/HIDE TRANSCRIPT

Hello, Iím Kevin Barr, Head of SEIís Investment Management Unit. Over the next few minutes, I will provide an update on the global financial markets and their impact on our strategies. I will also review our expectations for the remainder of the year.

The third quarter represented yet another twist in the roller coaster ride that investors have been on this year. The first quarter saw a broad-based rally as investors took advantage of historically low equity valuations and the promise of central bank stimulus. This investor confidence didnít last long as concerns over European and Chinese economies prompted investors to take profits and look for safety in the second quarter. By the beginning of the third quarter, the markets had erased the yearís gains and were in the red.

As the quarter developed, we began to see signs of improved economic growth in the United States and stimulus commitments from the Chinese government and central banks in Europe and the U.K. By quarter end, investors had recommitted capital to the markets and most major indices ended in positive territory.

Looking at the numbers, the MSCI All Country World Index, which serves as a proxy for global equity markets, gained just under seven percent for the quarter in U.S. dollar terms. The Index saw gains in all sectors, with riskier areas setting the pace.

The Barclays Global Aggregate Bond Index, which represents global bond markets, gained more than three percent for the quarter in U.S. dollar terms.

U.S. equity markets, represented by the S&P 500 Index, gained more than six percent. On the fixed-income side, the Barclayís Capital U.S. Aggregate Bond Index rose more than one and a half percent.

In times like these, the market leaders in one quarter may become laggards in the next quarter only to change direction once again in the quarter that follows. These conditions lead to sharp differences in investor behavior. Those seeking to avoid losses often move their money out of the financial markets and into cash. Investors seeking gains without clearly defined objectives may turn to real estate, precious metals or other speculative investments. Those with clearly defined financial objectives generally stay invested, adjusting their holdings and strategies based on proximity to their goals.

The volatile market environment we have experienced in recent years has been favorable for diversified portfolios, and SEIís portfolios largely reflect this. SEI has been a long-time proponent of goals-based investing, and our investment strategies that include both equity and fixed-income funds once again benefited from diversification across asset classes.

As the end of the year approaches, we expect to see a continuation of the volatility and unpredictable markets that we have seen since the start of 2012. This environment provides the perfect opportunity for investors to make sure their goals and their portfolios are well aligned.

We will continue to look to balance the complexities of the global economic environment and the underlying fundamentals within each asset class. The more than 100 investment managers we work with represent what we view as some of the best thinking in the global marketplace, and we will continue to take active steps to position our portfolios based on near-term and long-term market conditions.

Thank you, as always, for your trust and confidence in SEI.

Index Definitions

The MSCI All Country World Index is a market capitalization weighted index composed of over 2,000 companies, and is representative of the market structure of 48 developed and emerging market countries in North and South America, Europe, Africa, and the Pacific Rim. The index is calculated with net dividends reinvested in U.S. dollars.

The Barclays Capital Global Aggregate Bond Index (formerly Lehman Brothers Global Aggregate Index), an unmanaged market capitalization weighted benchmark, tracks the performance of investment-grade fixed -income securities denominated in 13 currencies. The index reflects reinvestment of all distributions and changes in market prices.

The S&P 500 Index is a capitalization-weighted index made up of 500 widely held large-cap U.S. stocks in the Industrials, Transportation, Utilities and Financials sectors.

The Barclays Capital U.S. Aggregate Bond Index (formerly Lehman Brothers U.S. Aggregate Bond Index) is a benchmark index composed of U.S. securities in Treasury, Government-Related, Corporate, and Securitized sectors. It includes securities that are of investment-grade quality or better, have at least one year to maturity, and have an outstanding par value of at least $250 million.

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the Funds or any stock in particular, nor should it be construed as a recommendation to purchase or sell a security, including futures contracts. There is no assurance as of the date of this material that the securities mentioned remain in or out of SEI Funds.

SEI Investments Management Corporation (SIMC) is the adviser to the SEI Funds, which are distributed by SEI Investments Distribution Co. (SIDCO) SIMC and SIDCO are wholly owned subsidiaries of SEI Investments Company.

To determine if the Funds are an appropriate investment for you, carefully consider the investment objectives, risk factors and charges and expenses before investing. This and other information can be found in the Fundsí prospectuses, which can be obtained by calling 1-800-DIAL-SEI. Read them carefully before investing.

There are risks involved with investing, including loss of principal. Current and future portfolio holdings are subject to risks as well. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Narrowly focused investments and smaller companies typically exhibit higher volatility. Bonds and bond funds will decrease in value as interest rates rise. High-yield bonds involve greater risks of default or downgrade and are more volatile than investment-grade securities, due to the speculative nature of their investments.

Diversification may not protect against market risk. There is no assurance the objectives discussed will be met. Past performance does not guarantee future results Index returns are for illustrative purposes only and do not represent actual portfolio performance. Index returns do not reflect any management fees, transaction costs or expenses. One cannot invest directly in an index.

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