A Look Back at Q1 Calls

 

Russ Koesterich, CFA | iSharesBlog | April 1, 2013 

This past Sunday wasn’t just Easter, it also marked the end of the first quarter. In between hunting for eggs and family meals, I took some time over the long weekend to reflect on how the economy and markets have performed so far in 2013 vs. what I expected late last year.

My Economic Calls

  • The US Economy: While inflation and interest rates remain low, as I expected, I definitely underappreciated the resilience of the US economy. I won’t know how fast the economy grew in the first quarter for another month, but it likely grew faster than I expected. One reason: Despite a significant tax hike, consumption has held up better than expected thanks to an improving labor market and a continued resurgence in home prices.
  • Outside the United States: As anticipated, Europe continues to struggle and Chinese growth has modestly improved. While Chinese growth numbers have been erratic, they still suggest that the economy will deliver on China’s 7.5% to 8% growth target.

My Investment Calls

  • Equities: Late last fall, I expected that equities would beat bonds and within equities, I had a preference for mega-caps, certain countries in Northern Europe and select emerging markets. So far in 2013, mega and large caps have narrowly underperformed small caps, which have benefited from strong flows. Europe has played out mostly to script, with Northern Europe beating Spain and Italy. And my big miss for the quarter: My preference for select emerging markets including China and Brazil. While the Chinese economy has accelerated, investors remain nervous about the financial system, and Brazilian growth continues to disappoint.

 

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