Why Did Latin American Markets Outperform in 2022?

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US equities has one of the worst returns in recent years in 2022. Other developed markets did had similar performance as well. However some emerging markets shined. For instance, Latin American equity markets had a good year relative to their US counterparts. The following chart shows the performance of major Latin American indices in 2022 in US dollar terms:

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Source: Latin America in the Long Term: A Potential Application of U.S. Equities by Cristopher Anguiano, S&P

The reason Latin American counties performed better than US equities is because their equity indices have less exposure to two sectors that got hit bad last year – Information Technology and Consumer Discretionary. Instead of heavy weightage to these sectors, Latin Indices have more allocation to Energy, Financials, Materials and Consumer Staples as shown in the table below according to an article by Cristopher Anguiano at S&P:

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Source: Latin America in the Long Term: A Potential Application of U.S. Equities by Cristopher Anguiano, S&P

The key takeaway for investors that diversification across countries and regions is important. While developed equities had a poor year Latin stocks had a decent year since the sectoral composition of their indices is different.

Related ETFs:

  • iShares MSCI Mexico Capped Investable Market (EWW)
  • iShares MSCI Brazil Index (EWZ)
  • iShares MSCI All Peru Capped Index (EPU)
  • Global X FTSE Colombia 20 ETF (GXG)

Disclosure: No Positions

Dividend Stocks Offer Protection Against Inflation: Canadian Example

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Dividend-paying stocks have many advantages over non-dividend payers. Dividend stocks only offer extra income but also offer protection against inflation. In many counties, dividend yields could match or exceed the inflation rates. In the following example, Canadian dividend equities offered income that met or exceeded inflation. From an article at RBC:

Income for protection against inflation

Dividend stocks distribute regular income, which can help investors meet their current spending needs. Fixed bond payments are also regular but tend to be more exposed to inflation than equities. This is because stocks may grow their dividends and realize capital appreciation (Figure 2), potentially making them better positioned to keep pace with, or exceed, inflation over the long term.

Source: A case for dividend investing, RBC Global Asset Management

Periodic Table of Annual Returns for Canadian Investors 2012 to 2022: Chart

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The Periodic Table of Annual Returns for Canadians has been updated for 2022 by Stingy Investor. This table shows the performance of various asset classes by year in Canadian dollars. The chart below shows the returns from 2012 to 2022. For earlier year returns click on the link and you can use the arrows to get historical data. Last year the TSX performed relatively better than the S&P 500 but still in the negative.

Source: Stingy Investor

Data Sources: Many thanks to Norbert Schlenker at Libra Investment Management for collecting the data that this calculator uses. Original public data sources include: Bank of Canada, BC Government Statistics, Canadian Institute of Actuaries, Economagic.com, Financial Post, Globe & Mail, globefund.com, Kitco, Libra Investment Management Inc., MSCI, Prof. Werner Antweiler (UBC), Scotia Capital, BMO, Standard & Poors, Statistics Canada (Table 326-0001), DH&A, and Wilshire Associates.

Related ETFs:

  • iShares MSCI Canada Index Fund (EWC)
  • SPDR S&P 500 ETF Trust (SPY)
  • SPDR Gold Trust (GLD)

Disclosure: No positions

Emerging Markets Returns by Year 2008 to 2022: Chart

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The Emerging Markets Annual Returns chart has been updated by Novel Investor with 2022 data. The worst performers last year were Hungary, Taiwan and Korea. Steep declines in the tech sector hurt Korea and Taiwan as they are heavily dependent on the sector. The top performer was Turkey followed by Chile and Brazil. Chile was crushed a while ago. So it is not surprising Chilean stocks had a relatively better run last year. With the election of Lulu, investors are betting on a revival of booming economy for Brazil and higher returns for Brazilian equities.

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Source: Novel Investor

Related ETFs:

  • Market Vectors Russia ETF (RSX)
  • iShares MSCI Mexico Capped Investable Market (EWW)
  • iShares FTSE/Xinhua China 25 Index (FXI)
  • The iShares MSCI India ETF  (INDA)
  • iShares MSCI Brazil Index (EWZ)
  • iShares MSCI All Peru Capped Index (EPU)
  • Global X FTSE Colombia 20 ETF (GXG)

Disclosure: No Positions

S&P 500 Sector Performance by Year from 2008 to 2022: Chart

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The annual S&P sector performance chart for the year ending in 2022 was published by Novel Investor this week. This is based on total returns. In 2022, the top performer was the energy sector with an annual return of over 65% followed by utilities. With the S&P 500 in bear market, most of the traditionally strong sectors during bear markets such as utilities, consumer staples, health and industrials performed relatively well to the worst hit sectors such as tech and telecom.

Overall the key takeaway from the chart is that diversification is important for success with equity investing. No sector is best performer year after year forever. The best performer in one year can easily end up as the worst the following year.

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Source: Novel Investor

Related ETFs:

  1. SPDR S&P 500 ETF (SPY)
  2. iShares Core S&P 500 ETF (IVV)
  3. Vanguard S&P 500 ETF (VOO)
  4. SPDR Portfolio S&P 500 ETF (SPLG)

The Complete List of Constituents of the S&P 500 Index can be found here.

Disclosure: No positions