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September 2012 Recap
Hello, and welcome to the State Farm market recap audio broadcast. Each month, we offer a perspective on recent events impacting the financial markets in the U.S. and abroad. This is the recap for the month of September 2012.
Equity markets continued their upward momentum in September marking the fourth month of consecutive gains and closing out a solid third quarter performance. For the quarter, the S&P 500 Index® gained 6.4 percent advancing the index year-to-date return to a positive 16.4 percent.
Lets first review the U.S. equities markets.
In the U.S., stocks continued to rally in September amongst the back drop of weakening global economic activity. The S&P 500 Index gained 2.6 percent for the month, driven largely by the latest bond-buying programs by the U.S. Federal Reserve and the European Central Bank, as well as additional stimulus by the Bank of Japan. At month end, small-cap stocks, as measured by the Russell 2000 Index, led all domestic equities higher gaining 3.3 percent. Mid-cap stocks, as measured by the Russell Mid-cap Index, also ended the month in positive territory advancing 2.1 percent.
Among the various sectors within the S&P 500, telecommunications services gained 3.9 percent as large carriers rolled out new wireless pricing amid the release of Apple Incorporateds iPhone 5. Consumer discretionary, energy, health care, and materials were also particularly strong, posting monthly returns in excess of 3 percent. Utilities lagged for the month with gains slightly below 1 percent.
Year-to-date each of the major U.S. stock indices are in double-digits led by large-cap stocks returning 16.4 percent, followed by small-cap stocks and mid-cap stocks which have returned 14.2 percent and 14.0 percent, respectively.
For the longer 1-year time period, small-cap stocks led the major stock indices posting positive total returns of 31.9 percent, followed by large-cap stocks and mid-cap stocks which have returned 30.2 percent and 28.0 percent, respectively.
Lets now turn our attention to the foreign equities markets.
Global equities markets advanced in September as the European Central Bank (ECB) moved aggressively to address the regions challenging financial crisis. During the month, the ECB approved a plan to buy unlimited amounts of sovereign debt from struggling euro-zone nations aimed at lowering borrowing costs and boosting the economy. For the month, the Morgan Stanley Capital International Europe, Australasia, and Far East Index of developed countries, posted a positive return of 3.0 percent. Emerging markets, as measured by the Morgan Stanley Capital International Emerging Markets Index, also advanced gaining 6.0 percent.
Japanese stocks ended the month slightly higher gaining 2.3 percent, in U.S. dollar terms, as the Bank of Japan announced a new round of stimulus by expanding its asset-purchase program by another 10 trillion Japanese Yen. Japans industrial production and overall economy has been struggling most of the year as a strengthening yen and slowing economic conditions in China and Europe have weighed heavily on the demand for the countrys exports.
Lets now switch our focus to the U.S. fixed income markets.
In the U.S., fixed income markets went mostly unchanged in September while the riskier high-yield debt instruments posted a modest gain. For the month, the Barclays U.S. Aggregate Bond Index returned 0.1 percent while high yield bonds, as represented by Barclays Corporate High-Yield Index, advanced 1.4 percent. Over the longer 1-and 5-year time periods, bonds, as represented by the Barclays Aggregate Bond Index have recorded positive returns of 5.2 percent and 6.5 percent, respectively.
The U.S. municipal bond market experienced a slight increase for the month as the Barclays Municipal Bond Index advanced 0.6 percent and extended its year-to-date return to 6.1 percent. Over the longer 1- and 5-year time periods, municipal bonds have posted positive returns of 8.3 percent and 6.1 percent, respectively.
U.S. Treasury bonds were essentially flat for the month as monetary easing by central banks reduced investor appeal for the relative safe-haven assets. For the month, the yield on the benchmark 10-Year Treasury Note closed at 1.65 percent while the 30-Year Treasury Bond yield ended the month at 2.82 percent.
With that, we will conclude this broadcast. Thank you again for listening to the State Farm Market Recap. Please join us again next month for the latest market review.
U.S. stocks face three major challenges as we look ahead to 2013; the sovereign debt crisis in Europe, slowing economic growth in China, and the threat of a so-called fiscal cliff in the U.S. after the November elections. Can stocks maintain their momentum in the coming months, or will the U.S. economy and financial markets be disrupted by macroeconomic events?
Securities Issued by State Farm VP Management Corp. For more information, call 1-800-447-4930.
This recap has been prepared by State Farm VP Management Corp. for informational purposes and should not be considered a recommendation to buy or sell any security. Any opinions discussed herein reflect our judgment as of the date of publication and are subject to change.
The MSCI Emerging Markets Index is a capitalization-weighted index of stocks from 26 emerging markets that only includes issues that may be traded by foreign investors.
Mutual Funds Disclosures
It is not possible to invest directly in an index.
The Russell 2000® Index tracks the common stock performance of the 2,000 smallest U.S. companies in the Russell 3000® Index
The Russell 2500 Index tracks the 2,500 smallest companies in the Russell 3000 Index.
The Russell 1000 Index is a stock market index that represents the highest-ranking 1,000 stocks in the Russell 3000 Index.
The Russell Midcap Index measures the performance of the mid-cap segment of the US equity market and is a subset of the Russell 1000 Index.
The Dow Jones Industrial Average is an unmanaged average of 30 actively traded stocks.
The NASDAQ Composite is an unmanaged market capitalization weighted index that is designed to represent the performance of the National Market System.
The S&P 500® Index tracks the common stock performance of 500 large U.S. companies.
The S&P 1500 Index is a stock market index of U.S. stock that includes all stocks in the large cap S&P 500 Index, the mid cap S&P 400 Index, and the small cap S&P 600 Index.
The Morgan Stanley Capital International Europe, Australasia and Far East Free (EAFE® Free) Index currently measures the performance of stock markets of Europe, Australia, New Zealand, and the Far East.
The Morgan Stanley Capital International Europe Index is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe.
The Barclays Capital 1-5 Year U.S. Treasury Index measures the performance of short-term U.S. Treasury Securities maturing within one to five years.
The Barclays Capital U.S. Aggregate Bond Index represents debt securities in the U.S. investment grade fixed rate bond market.
The Barclays Capital Municipal Bond Index is an unmanaged index representative of the tax-exempt bond market.
The Barclays Capital High Yield Index includes all fixed income securities having a maximum quality rating from Moodys Investor Service of Ba1, a minimum amount outstanding of $100 million, and at least one year to maturity.
The Barclays Capital TIPS Index measures the performance of the US Treasury Inflation-Protected Securities (TIPS) market.
The Citigroup 3 Month T-Bill Index is an average of the last 3-month Treasury bill issues (excluding the current month-end bill).
The FTSE EPRA/NAREIT Developed REIT and Non-Reit Index is a subset of the Developed Index, which is designed to track the performance of listed real estate companies and REITS worldwide.
The MSCI ACWI (All Country World Index) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets.
The Nikkei 225 Index is a price-weighted index comprised of Japans top 225 blue-chip companies on the Tokyo Stock Exchange.
The Credit Suisse High Yield Index is designed to mirror the investible universe of the $U.S. Denominated high yield debt market.
Standard & Poors®, S&P®, S&P 500®, Standard and Poors 500, and 500 are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by State Farm Life Insurance Company, State Farm Life and Accident Assurance Company and the State Farm Variable Product Trust. Neither the Large Cap Equity Index Fund nor the Stock and Bond Balanced Fund is sponsored, endorsed, sold or promoted by Standard & Poors, and Standard & Poors makes no representation regarding the advisability of investing in the Large Cap Equity Index Fund or the Stock and Bond Balanced Fund.
The Russell 2000® Index is a trademark/service mark, and Russell is a trademark of the Frank Russell Company. The Small Cap Equity Index Fund is not sponsored, endorsed, sold or promoted by, nor in any way affiliated with the Frank Russell Company. Frank Russell Company is not responsible for and has not reviewed the Small Cap Equity Index Fund nor any associated literature or publications and Frank Russell Company makes no representation or warranty, express or implied, as to their accuracy, or completeness, or otherwise.
The EAFE® Free Index is a trademark, service mark and the exclusive property of Morgan Stanley Capital International, Inc. (MSCI) and its affiliates and has been licensed for use by the State Farm Variable Product Trust (the Trust). The International Equity Index Fund (the Fund), based on the EAFE® Free Index, has not been passed on by MSCI as to its legality or suitability, and is not issued, sponsored, endorsed, sold or promoted by MSCI. MSCI makes no warranties and bears no liability with respect to the Fund. MSCI has no responsibility for and does not participate in the management of the Fund assets or sale of the Fund shares. The Trusts Prospectus contains a more detailed description of the limited relationship MSCI has with the Trust and the Fund.
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