China and Large-Cap Stocks
COMMENTARY In 2011, we followed eight things that financial media prognosticators said would happen last year. Here's our final update. Keep in mind if they were sure things -- they should all (or at least most of them) have come true. We will give a score of + for a forecast that can true, - for one that was wrong, and a 0 for one that was basically a tie.
We begin with China being the best place to invest. In 2011, S&P's China ETF (GXC) had a return of -16.8 percent, underperforming the S&P 500 Index by about 19 percentage points. It also underperformed U.S. small, small-cap value, large-cap value stocks and U.S. REITs as well. And despite the problems in Europe, it even underperformed the MSCI EAFE Index. However, China wasn't the worst place to be, as GXC did outperform emerging market stocks. Score - (Score 0 +/1-)
The second sure thing was that this was going to be the year of large-cap stocks. Since large-cap stocks outperform small-cap stocks about 40 percent of the time, this is not much worse than a coin flip -- and if gurus keep predicting it will happen, they'll eventually get it right. That was the case in 2011. The S&P 500 (2.1 percent) topped the Russell 2000 (-4.2 percent). Score + (Score 1+/1-)
Click "Next," above, to see how the other predictions fared.