It wasn’t a barnburner of a year like the one before it but nonetheless capital market returns for 2010 turned out to be quite respectable. Pretty much all of the equity market returns for the year were realized after Labour Day demonstrating once again the futility of forecasting short-term returns. If you recall, most analysts in late summer were forecasting an imminent market downturn.
Canadian REITs were once again the best performers returning about 22% in total returns. The TSX Composite was a close second returning 17.3% including dividends. Canadian Bonds had a positive year as well. The Canadian Dollar appreciated 5.6% against the US dollar and dragged down US equity returns for Canadian investors. The S&P 500 returned 8.73% in Canadian Dollar terms including dividends. MSCI EAFE and MSCI Emerging Market indices returned 1.79% and 12.50% respectively.
DEX Universe Bond Index 6.74%
DEX Short Term Bond Index 3.56%
DEX Real Return Bond Index 11.09%
Canadian REITs 21.92%
TSX 60 13.54%
TSX Composite 17.31%
S&P 500 (in CAD) 8.73%
MSCI EAFE (in CAD) 1.97%
MSCI Emerging Markets Index (in CAD) 12.50%
If you are interested in asset class returns for previous years, Norbert Schlenker of Libra Investments maintains a spreadsheet of total returns for various asset classes going back to 1970. Total returns for Canadian REITs were obtained from the monthly market statistics published by PWL Capital.
Unfortunately, investors who will be net buyers of stocks over the next decade will (or should) view the current level of the stock markets with some dismay. With the TSX Composite forecasted to post earnings of $830 in 2011, the earnings yield of the market is just 6.2% (compared to 10-year Govt. of Canada bonds yields of 3.2%). The S&P 500 trades at similar valuation levels — $94 in operating earnings for 2011 for an earnings yield of 7.5% compared to the 3.3% yield on 10-year Treasuries.