Market Leadership in 2012: Domestic and Foreign

December 26, 2012

As the year draws to a close, we’re looking back at market leadership in 2012, and both foreign and domestic funds and ETFs had distinct periods of outperformance in 2012.

One of the biggest market changes in 2012 was the third quarter shift from domestic to foreign. Domestic U.S. markets had strongly outperformed foreign markets in 2010 and 2011, and the U.S. continued to outperform for the first half of 2012. As a result, our equity portfolios were 100% domestic for most of 2012.

Despite continued high unemployment and slow growth, the U.S. economy has been more attractive to investors, as Europe was saddled with its debt crisis and faced the additional headwinds brought by broad austerity measures. Although U.S. leadership seemed clear (foreign and emerging market funds and ETFs were often among the lowest ranking funds in 2012), we often reminded investors that markets change and our global strategy would, at some point, lead us to once again own foreign funds again.

That point came in the third quarter as international funds and ETFs, particularly those focused in Europe, began rising up the ranks. By November, NoLoad FundX’s Monthly Upgrader Portfolio had bought its first international position in nearly 18 months, and by the end of the year, the MUP had 45% invested in five international funds and ETFs.

This is the third in a series of posts on Market Leadership in 2012. We also wrote about the strength of dividend-oriented funds and ETFs and large-cap growth in 2012.

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