The ACM Journal 2012 Q4

It was a year of crises. We started the year with Greece in turmoil, which then spread to many of the other European nations. There was concerned the European Monetary Union would dissolve and the Euro would be replaced with sovereign currencies, such as the Deutsch Mark, Italian Lira, French Franc, and the like.

Worry over the strength of the economic recovery in the U.S. also made headlines. Employment was weak, housing stagnated early in the year, and business and consumer confidence were anemic, at best. The Fed continued to provide stimulus through its bond buying and money printing mechanisms to help ensure we did not fall back into recession.

The misery was broken only by interludes of circus-like episodes of political folly. There was wrangling over whether Obamacare would be declared unconstitutional. There was an election where each candidate spent close to $1 billion to win the hearts and minds of the American public. And, of course, there was the “Fiscal Cliff,” which we detail elsewhere in this newsletter.

Against such a backdrop, no one would have expected the capital markets to provide gangbuster returns. Yet, that is exactly what happened. The nearby chart illustrates the strong returns provided by virtually every asset class.

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