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MARKET COMMENTARY  |  September 2015  |  FEATURING Timothy D. Armour & Rob Lovelace

Q&A With Portfolio Managers Tim Armour and Rob Lovelace

Perspective on Recent Market Selloff Triggered by China Woes

Global stocks have tumbled in recent days amid investor concerns about slowing economic growth in China. A sharp decline in Chinese stocks and a surprise currency devaluation have further stoked fears that the outlook for China is deteriorating, and events there could hurt its global trading partners, including Japan, Europe and ultimately the United States. China lowered interest rates and eased reserve requirements on banks in an attempt to calm investors and stimulate the economy. Against this backdrop, portfolio managers Tim Armour and Rob Lovelace share their thoughts on the unfolding events:

  • China now accounts for roughly 15% of the world’s gross domestic product and therefore has a greater impact than ever before on the global economy.
  • The most significant catalyst of the selloff was China’s unexpected decision to devalue its currency, delivering a shock to financial markets.

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World Markets Review for July 2015

Global stocks advanced amid improving economic data in the United States and an easing of the Greek debt crisis. Defensive sectors led markets higher as consumer staples, health care and utilities stocks rallied. Emerging markets stocks declined, weighed down by a sharp drop in Chinese shares and falling commodities prices. High-grade bonds gained from a flight-to-safety trade. The U.S. dollar rose against the euro, the yen and most other currencies.

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INVESTMENT INSIGHTS  |  August 2015  |  FEATURING Shaw B. Wagener

The Future Is Under Construction

Urbanization is nothing new. It’s been going on for centuries, and it helped make Europe and the United States global economic and political powers. But what is different about today’s wave of urbanization is its unprecedented speed and scale — it’s bigger and faster than ever.

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INVESTMENT INSIGHTS  |  August 2015  |  FEATURING Joanna F. Jonsson

Urbanization Is Transforming the World — Again

Per Capita GDP Has Risen in Tandem With Increases in the Urbanization Rate

Source: Exhibit from Urban World: Cities and the Rise of the Consuming Class, June 2012, McKinsey Global Institute,, © McKinsey & Company. All rights reserved. Reprinted by permission. Urbanization is the increasing number of people living in cities as populations shift from rural to urban areas; the definition of urbanization varies by country. Pre-1950 data for the United Kingdom are estimated. Historical per capita GDP is expressed in 1990 Geary-Khamis dollars, which reflect purchasing power parity (PPP) that estimates the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to each currency’s purchasing power. PPP helps determine the exchange rate adjustment so that identical goods and/or services in different countries have the same price when expressed in the same currency.

The wealth of nations soars when societies shift from rural to urban

Urbanization isn’t a modern phenomenon. In centuries gone by, the shift to living in cities underpinned the industrial revolutions of Europe and the United States and the rise of those regions to global economic and political power.

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INVESTMENT INSIGHTS  |  August 2015  |  FEATURING Joanna F. Jonsson

Getting Taller All the Time: Maybe the Sky Isn’t the Limit

2014 Was the “Tallest Year Ever,” With the Completion of a Record 97 Buildings Above 200 Meters

Sources: CTBUH Year in Review: Tall Trends of 2014, and Forecasts for 2015, Council on Tall Buildings and Urban Habitat; KONE Primer, CS European Capital Goods, May 2015, Credit Suisse. The total number of buildings completed for each year includes tall (600+ feet/200+ meters), supertall (900+ feet/300+ meters) and megatall (1,900+ feet/600+ meters) buildings; projected data for 2015 and 2016 represent expected, not possible, completions. The data for elevators and escalators are Credit Suisse estimates, based on company data as of fiscal year 2014, for new installations and maintenance.

The 3,281–foot Kingdom Tower in Saudi Arabia will be the world’s first kilometer–tall building

Elisha Otis founded The Otis Elevator Company in 1853, but it was the company’s 1903 innovation called the gearless traction elevator that set in motion a remarkable change in the urban landscape.

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INVESTMENT INSIGHTS  |  August 2015  |  FEATURING Andrew H. Dougherty

A $57 Trillion Bill for Infrastructure Is Coming Due

Global Investment (Trillions), 2013–2030

Source: Exhibit from Infrastructure Productivity: How to Save $1 Trillion a Year, January 2013, McKinsey Global Institute,, © McKinsey & Company. All rights reserved. Reprinted by permission. McKinsey calculated the estimate of
$57 trillion, or 3.5% of global gross domestic product, for global infrastructure need through 2030 by compiling projections of demand in the different infrastructure categories shown. The estimate for telecom covers only those members of the Organisation for Economic Co-operation and Development, plus Brazil, China and India. The estimated investment amounts, expressed in constant 2010 dollars, may not sum due to rounding. The constant dollar is an adjusted value of currency used to compare dollar values from one period to another.

The world faces a massive construction project just to keep up with projected growth

Some countries need infrastructure that simply meets basic human needs, such as safe drinking water. Another may want to modernize its transportation network, and still others may be trying to lay the groundwork for future global competitiveness by building a national broadband network.

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INVESTMENT INSIGHTS  |  August 2015  |  FEATURING Todd M. Saligman

The Secret to Keeping People in the Air? Groundwork

Airport Construction Projects Worldwide and Investment Amount (in Billions)*

*As of January 2015

Source: CAPA - Centre for Aviation, Premium Airports Database, Data are for existing airports with projects either in progress or planned for and with a good chance of completion.

Globally, $543 billion worth of airport construction projects are in progress

China started working on a new airport near Beijing on December 26, 2014. The airport, which is being designed by Netherlands Airport Consultants, is expected to be completed in 2018 and cost about 
$14 billion. Upon completion, the 7.5 million square foot terminal will accommodate about 45 million people per year.

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INVESTMENT INSIGHTS  |  August 2015  |  FEATURING Gregg E. Ireland

Africa Leapfrogs Landlines, and Takes a Shortcut to the Bank

Sources: 2014 State of the Industry: Mobile Financial Services for the Unbanked, March 2015, Groupe Speciale Mobile Association (GSMA); “Banks Vie for a Piece of Africa’s Mobile Banking Market,” August 15, 2014, The Wall Street Journal; Safaricom Limited FY15 Presentation. The GSMA Mobile Money report is available at The data for mobile financial accounts per 100,000 adults are as of June 2013. The total M-Pesa transactional value of $45 billion is for the fiscal year ended March 31, 2015.

Technological advances can allow countries to skip building out traditional infrastructure

Africa provides one of the classic examples of technology trumping traditional infrastructure. The introduction of mobile phones has allowed millions of Africans to receive the social and economic benefits of telephone networks without the sunk cost of massive landline infrastructure.

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World Markets Review for Second Quarter 2015

Global stocks produced mixed returns as signs of improving economic growth were offset by fears of rising interest rates and a worsening debt crisis in Greece. Telecommunications stocks proved to be a bright spot, driven higher by M&A activity, while the rate-sensitive utilities sector fell the most. Emerging markets stocks advanced, supported by monetary easing in China. Bonds declined and the dollar slipped 4% against the euro.

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INVESTMENT INSIGHTS  |  Mon Jun 01 13:38:00 PDT 2015

Recent Developments in the Greek Debt Saga

The situation in Greece remains very fluid. Unwilling to implement certain proposed austerity measures, the Greek government has rejected the proposal for an extension of the financial bailout package by its official creditors. That said, it is not a foregone conclusion that this will lead to a significant debt default or Greece’s exit from the eurozone.

Nevertheless, the possibility of both events has increased, leading to greater caution among investors and a flight to safer, more liquid financial assets. The next week is an important one and we will continue to monitor events closely. According to media reports, a last-ditch effort to broker a deal between the Greek government and its creditors may be underway.

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World Markets Review for May 2015

Global stocks managed a slight gain as investors reacted to mixed reports about the pace of worldwide economic growth. Technology and health care stocks rallied, while the energy sector continued to feel the impact of volatile oil prices on corporate earnings. Japanese stocks advanced on improving economic data. Emerging markets declined amid fears of higher U.S. interest rates. Bonds declined and the dollar rose against the euro and the yen.

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Can Smartphones Replace Cash and Cards?

Mobile payments see growing acceptance as volumes surge

Sources: BI Intelligence (both charts) and Boston Retail Partners (left chart). Data for mobile payment volume are estimates and those for payment types are as of 2015.

There’s a big payoff for the winner of the race to change the way you pay

Cash or check? How about smartphone. In 2014, customers in U.S. retail stores made an estimated $5.5 billion in purchases using a mobile device. That’s only about 0.1% of the nation’s sales. In 2019, however, shoppers are expected to spend an estimated $819 billion using a mobile device, or about 15% of sales, according to researchers at BI Intelligence.

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INVESTMENT INSIGHTS  |  May 2015  |  FEATURING David Carpenter

Digital Is Transforming the Music Business

Music Downloads Top the Charts

Source: Recording Industry Association of America. Data are based on year-end shipment statistics for the recorded music industry in the United States and represent the cumulative total of all four music formats shown in any given year. Units refers to the raw volume of products, which may be physical or digital, in a given category. Vinyl, cassettes, CDs and downloads all include both albums and singles.

iTunes rocked the industry, but streaming may represent another seachange

Yes, sales of vinyl records are surging — nearly 10 million old-fashioned platters were sold in 2013, the most since 1997. Who’s buying records? Mostly hipsters into indie-rock, and diehard audiophiles who contend vinyl recordings sound better than digital (among recent bestsellers on vinyl: Jack White’s Lazaretto and Beck’s Morning Phase). While it’s nice for old times’ sake to see vinyl win a battle, the war over how we listen to music may be over, and if digital hasn’t already won, the others may be down for the count.

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No Status Quo: The Difference Disruption Makes

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Out with the old, in with the new. People of nearly every era have probably surveyed the world around them and marveled at how quickly things can change. But these days, change seems to be setting a new speed record.

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May 2015
 |  FEATURING Darrell Spence

Oil Prices a Boon for U.S. Economy

An economist discusses why he sees the recent drop in oil prices as good news for the U.S. economy, despite widespread macroeconomic weakness overseas.

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INVESTMENT INSIGHTS  |  May 2015  |  FEATURING Jonathan Knowles

The Cloud Potential Is Sky-High

Revenue from the cloud came fast for AWS

Sources: Capital Group and SEC (U.S. Securities and Exchange Commission) reported company financial filings. Data are estimates.

So high, so fast: Amazon Web Services is the fastest growing business in the history of enterprise IT

First off, all of your music and pictures aren’t really up in the air. The cloud is a cool name, but the reality of data storage and computing is more akin to a farm than the sky.

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Unleashing the Immune System

Renewed focus on research and technology boosts biopharma revenue growth

Source: EvaluatePharma®, March 2014, Evaluate Ltd, Data are based on sales totals that include conventional, biotechnology, other unclassified and over-the-counter sales.

Innovation in biopharma has changed the pharmaceutical industry, and the way we treat cancer

Cancer has a cloaking mechanism that’s so efficient the immune system can’t see the disease. That cloak of invisibility, however, may soon be pulled away thanks to revolutionary new approaches in immuno-oncology, which harnesses the patient’s own immune system to recognize and fight cancer.

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Warp Speed: Churn Rate for S&P 500 Is Accelerating

Sampling of companies that have entered and exited the S&P 500 Index, 1979–2015

Sources: S&P Capital IQ; Standard & Poor’s Analysts Handbook, 1980, and Stocks in the Standard & Poor’s 500, 1982, Standard & Poor’s Corporation; Dow Jones Newswires, 1987, Dow Jones; and, 2015, Thomson Reuters. Standard & Poor’s 500 Composite Index℠ and S&P 500® are service/trademarks owned by the McGraw-Hill Companies, Inc.

Many companies have turned disruption into opportunity 

Yale professor Richard N. Foster, co-author of Creative Destruction, has a warning for executives whose companies are now listed in Standard & Poor’s 500 Composite Index: Your days may be numbered.

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World Markets Review for April 2015

Global stocks rose modestly amid a strong rally in the energy sector. Rising oil prices, surging M&A activity and central bank stimulus measures helped to support world stock prices despite a slowdown in U.S. economic growth during the first quarter. Emerging markets rallied as market observers pushed back the timing of an increase in interest rates by the Federal Reserve to later in the year. Bond markets declined and the dollar lost ground against the euro, the pound and most other currencies.

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INVESTMENT INSIGHTS  |  April 2015  |  FEATURING Rob Lovelace

Dollar Strength and the Case for Selective Hedging

Many Currencies Face Dollar Strength and Higher Volatility

Dollar index of major currencies, calculated by the Fed using daily data (not seasonally adjusted) indexed to 100 as of March 1973. Volatility is three-month option-implied at-the-money volatility, calculated by Citi using a simple weighted average of major currency pairs (57.6% euro-USD; 11.9% sterling-USD; 3.6% Swiss franc-USD; 13.6% yen-USD; 4.2% Swedish krona- USD; 9.1% Canadian dollar-USD); a lower number signifies lower volatility. Investors cannot invest directly in indexes.

Sources: Capital Group, Citi Research, Federal Reserve Board, MSCI.


  • A strong U.S. dollar and greater currency volatility are having a significant impact on near-term market returns.
  • The euro has already depreciated substantially against the dollar in recent months, and further declines may be limited.
  • Some investors have responded by turning to currency-hedged exchange-traded funds (ETFs), but that approach has its own problems. 

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Focus on Evolving Opportunities in Emerging Markets

Moving Up the S-Curve

China is one of the most important engines of global growth. Despite the recent slowdown, the transition of a huge middle class to a higher standard of living will have an enormous impact on companies in China and across the world.

Sources: CEIC, National Bureau of Statistics of the People’s Republic of China, Deutsche Bank.


  • The long–term structural growth story in emerging markets remains intact. These areas of the world will likely continue to face cyclical headwinds, but things appear more favorable on a secular basis.
  • Headline risk is becoming less significant in emerging markets. Globalization and the broadening of investment opportunities has minimized the impact that regional and country-specific events have on the share prices of individual companies.

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INVESTMENT INSIGHTS  |  Thu Feb 05 17:24:39 PST 2015

Oil Price Declines Could Have Far-Reaching Effects

It Isn’t Just Shale: Oil Production Growth Is a Global Phenomenon

While U.S. shale has certainly contributed to a steady rise in global supply, non-OPEC supply growth has also been robust in the face of increasing production from Saudi Arabia.

Annual World Oil Production, 1980–2014

Source: U.S. Energy Information Administration. Data for OPEC, Saudia Arabia and World production as of September 30, 2014. Data for U.S. production as of December 16, 2013. U.S. figures for 2013 and 2014 are forecasts.

Analysts and Portfolio Managers Weigh Valuations Amid Ongoing Volatility

In 2014, oil prices posted their largest annual decline since the global financial crisis, losing more than 45% as weaker demand and strong global crude output created a supply glut. The collapse saw prices at a five–year low, battering energy shares — which finished 2014 nearly 13% lower — and weighing heavily on financial markets in oil–exporting countries. In our view:

  • Oil prices could continue to remain low — and may even continue to decline — before supply–demand imbalances are corrected.
  • Some oil companies have begun to show signs of better capital discipline, but many have room to improve.
  • Despite lower prices in the near term, demand fundamentals over the longer term should remain supportive of higher oil prices.
  • Market declines may provide some attractive entry points for investors.

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INVESTMENT INSIGHTS  |  January 2015  |  FEATURING Frank C. Hu

An Analyst’s Perspective: Do Low Oil Prices Put Dividends in Jeopardy?

Oil Companies Have Been a Healthy Source of Dividends Globally

In 2014, the oil industry was the second-largest payer of dividends after financials, contributing 13% of the dividends paid by companies in the MSCI All Country World Index. Royal Dutch Shell and Exxon Mobil were among the largest dividend payers of all index constituents.

Source: FactSet, as of December 31, 2014.

* Figures may not total 100% due to rounding. 

Over the last few years, large oil and gas companies have been among the biggest payers of dividends. Clearly the decline in oil prices is concerning because in most cases, it means that dividends cannot be fully funded from free cash flow. But I believe that, for the large integrated oil companies, the oil price would have to fall a lot further to call into question their ability to pay and increase their dividends.

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INVESTMENT INSIGHTS  |  January 2015  |  FEATURING Rob Lovelace

The Future Looks Bright

Flying cars? No, sorry. Hoverboards? Probably not, although there is progress on that front. The future, it seems, isn’t going to be filled with all the fantastic things people have dreamed up. But it is going to be remarkable.

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INVESTMENT INSIGHTS  |  April 2014  |  FEATURING Rob Lovelace

A New Revolution

There are periods of fundamental change that can transform the way we live and work. The Industrial Revolution, of course, changed everything from agriculture to the social structure, effectively ending the way mankind had functioned for thousands of years.

Today it seems as if we are in the middle of another revolution, and clearly these changes pose significant challenges and opportunities for long-term investors.

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INVESTMENT INSIGHTS  |  April 2014  |  FEATURING Brad Barrett

Going Mobile: “M-commerce” Drives E-commerce Higher

Sources: International Strategy & Investment, United States Census Bureau and comScore, Inc. Figures for e-commerce sales exclude autos, gas and restaurants.

A disruptive force and opportunity, smartphones boost online sales

  • For many people around the world shopping now means going online as well as going to the store. The acceleration of e-commerce during the past few years has been rapid and dramatic.

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MARKET COMMENTARY  |  Fri Mar 07 12:59:19 PST 2014

Long-Term Global Financial Impact of Ukraine Crisis Expected to Be Limited

  • Ukraine is facing significant political and financial challenges amid a fragile economic backdrop and twin deficits. Investors should expect elevated market and currency volatility.
  • The political situation is fluid. Currently, we anticipate that the longer term impact on global equity and bond markets should be limited. Similarly, there appears to be only a relatively small risk of significant contagion spreading to other developing economies.
  • Russian economic growth could decelerate further, which may pressure company earnings and lead to a moderately deteriorating credit situation. That said, Russia’s overall financial metrics remain sound and arguably a significant degree of uncertainty is reflected in Russian debt prices.

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INVESTMENT INSIGHTS  |  February 2014  |  FEATURING Eu-Gene Cheah

A Prescription for Innovation

The 39 New Drugs Approved in 2012 Represented the Most Approved in More Than a Decade

Most of the drugs are “first-in-class,” meaning they use new and unique ways for treating a medical condition.

Source: U.S. Food and Drug Administration (FDA). Innovative drugs represent new molecular entities, which are novel new medicines or active ingredients that have never before been marketed in the United States in any form, as approved by the Center for Drug Evaluation and Research, a division of the FDA. The number of drugs approved for 2013 is as of October 8, 2013.

In the world of pharmaceuticals, new drugs are known as NMEs, or new molecular entities. In 2012, the Center for Drug Evaluation and Research, a federal agency, approved 39 NMEs, the highest total in more than a decade.

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Develop a New Perspective for Portfolio Construction

Rising incomes have introduced emerging markets consumers to a wide variety of luxuries common in the developed world, from better education and health care to smart phones and luxury automobiles. But developing nations have also increasingly adopted Western lifestyles and diets, predisposing large portions of their population to a serious epidemic: Type 2 diabetes.

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INVESTMENT INSIGHTS  |  February 2014  |  FEATURING Claudia P. Huntington

Follow the Money, Not Just the Mail

Look Beyond Europe-Domiciled Companies

Revenues by region

Source: MSCI Economic Exposure Analysis-Security Report. As of June 30, 2013.

Connecticut isn’t the first place you think of when investing in an economic recovery in Europe. But could a New England-based online travel company really be more closely connected to an economic recovery in Europe than the continent’s largest companies?

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INVESTMENT INSIGHTS  |  February 2014  |  FEATURING Steve T. Watson & Claudia P. Huntington

The Developed World Regains Balance

Balancing Act: The Engines of the Global Economy May Be in the Process of Trading Places

Source: Bloomberg © 2013. Used with permission of Bloomberg. Calendar-year consensus estimates for 2013 represent year-to-date data, as of September 2013; therefore, full-year estimates may not match the trend for the remainder of 2013

Maybe the developed world isn’t quite ready to be put out to pasture after all. Suddenly, the United States seems to be feeling spry, Japan is shaking off the doldrums and Europe has a little bit of spring in its step.

Indeed, there are signs of stability and strength on a variety of fronts for all three of the old-school engines of the global economy. The advances may be gradual and fitful, but they are nonetheless reassuring evidence of the adaptability and vitality of the world’s largest developed economies.

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INVESTMENT INSIGHTS  |  February 2014  |  FEATURING Mark Denning

Welcome to the New Geography of Investing

* Source: MSCI Economic Exposure Analysis. As of June 30, 2013.

Over the past 40 years, the global economy has become increasingly interdependent. Free trade agreements, the European Union, economic reforms and the rise of a middle class in developing economies has allowed companies to compete for customers, labor, capital and natural resources on a global basis.

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MARKET COMMENTARY  |  January 2014

World Markets Review for Fourth Quarter 2013

Stocks ended the year with strong gains in developed economies, reaching historic highs in several key markets. Central bank stimulus, an accelerating U.S. economy, and improved corporate earnings supported higher valuations in the U.S, Europe and much of Asia. Emerging markets trailed developed markets, hampered by concerns about U.S. monetary policy. Information technology stocks rallied around the world, while rising interest rates weighed on the utilities sector. U.S. Treasury bonds declined as rates reached a high point for the year and investors moved out of safe-haven assets. The dollar fell 2% against the euro but rallied 7% versus the yen.

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MARKET COMMENTARY  |  January 2014

World Markets Review for 2013

Stocks enjoyed a strong rally in developed markets, supported by central bank stimulus, improving economic activity and reasonably good earnings growth. Emerging markets equities and most fixed-income markets declined as the U.S. Federal Reserve contemplated and later implemented a reduction in its massive bond-buying programs known as quantitative easing. The Fed action drove interest rates higher, pressuring bond markets and reducing demand for higher risk assets. Gold and silver prices plummeted as concerns about inflation waned.

Most sectors enjoyed double-digit gains for the year, led by consumer discretionary and health care stocks. Telecommunication services stocks advanced amid resurgent M&A activity. Corporate bond issuance soared as companies sought to lock in low borrowing costs. The year closed on a positive note as several key stock market indices reached all-time highs in December. U.S. equities rose 32%, the largest gain since 1997.

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