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November 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.

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This is the recap for the month of November 2012.

Equity markets edged higher in November despite the uncertainty of the U.S. Presidential election and the volatility brought on by the post-election "fiscal cliff" budget negotiations occurring within the U.S. Congress.

Now let's first review the U.S. equities markets.

In the U.S., stocks made modest advancements in November after overcoming another month of volatility. Post the Presidential election, the S&P 500 Index® dropped nearly 4 percent before climbing its way back and ending the month in positive territory. During the month the U.S. Commerce Department announced that real gross domestic product (GDP) gained a moderate 2.7 percent in the third quarter which was the best increase in GDP in nearly three years. For the month, mid-cap stocks led all the major stock indices upward gaining 1.6 percent. Large cap stocks and small cap stocks also advanced for the month posting total returns of 0.6 percent and 0.5 percent, respectively. Year-to-date through November, large-cap stocks, as measured by the S&P 500 Index, have returned 15.0 percent followed by mid-cap stocks, as measured by the Russell Mid-Cap Index® and small-cap stocks, as measured by the Russell Small-Cap Index® have posted total returns of 14.7 percent and 12.4 percent, respectively.

For the longer 5-year time period, U.S. stocks remain in positive territory led by mid-cap stocks posting positive returns of 3.0 percent, followed by small-cap stocks and large-cap stocks which have returned 2.8 percent and 0.4 percent, respectively.

Six of the ten sectors within the S&P 500 posted modest positive returns for the month with Materials and Consumer Staples leading the way posting returns of 1.5 percent and 1.4 percent, respectively. Utilities, the only sector in negative territory year-to-date, led the declining sectors lower for the month falling 5.0 percent. Over the longer-1-year period, six of the S&P 500 sectors have produced double-digit total returns led by Telecommunication Services, Health Care, and Consumer Discretionary posting returns of 20.0 percent, 19.3 percent, and 18.2 percent, respectively.

Let's now turn our attention to the foreign equities markets.

On a global basis, foreign equity markets started the month rather slow but ended strongly as investors became less concerned about the fiscal challenges in the U.S. and abroad and increased their holdings in riskier assets. Positive debt restructuring news from Spain and Greece helped ease economic concerns about the debt-burdened countries and moved the markets into positive territory for the month. The Morgan Stanley Capital International Europe, Australasia, and Far East Index advanced 2.4 percent for the month and extended its year-to-date total return to 13.7 percent.

Japanese stocks also posted a positive gain in November advancing 2.4 percent in U.S. dollar terms, as the country's industrial output rose in October, up for the first time in four months. For the month, the Nikkei Average, the leading index of Japanese stocks, advanced 5.9 percent, its best monthly performance since February.

Let's now switch our focus to the U.S. fixed income markets.

In the U.S. fixed income markets, long-term government bond prices were mostly unchanged for the month as investors kept to the sidelines in the absence of progress on Congressional budget negotiations. For the month, the Barclays U.S. Aggregate Bond Index posted a monthly return of 0.2 percent. Over the longer 1-and 5-year time periods, bonds, as measured by the Barclays Aggregate Bond Index, have posted positive total returns of 5.5 percent and 6.0 percent, respectively.

Municipal bonds experienced a modest increase in November as demand continued to outpace supply. For the month as the Barclays Municipal Bond Index advanced 1.7 percent and extended its year-to-date return to 8.1 percent. Over the longer 1- and 5-year time periods, municipal bonds have posted positive returns of 10.2 percent and 6.2 percent, respectively.

U.S. Treasury prices moved higher in November pushing yields lower as investors remained concerned about the inability of lawmakers to compromise on the expiring tax cuts and spending measures that threaten to slow the U.S. economy. For the month, the yield on the benchmark 10-Year Treasury note closed at 1.62 percent down from October's 1.72 percent while the 30-Year Treasury Bond yield ended the month at 2.85 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.

As the "fiscal cliff" negotiations continue to play out in Washington D.C., will the financial markets continue their upward momentum and end the last month of the year on a positive note?

Risk Disclosures

Investing involves risk, including potential for loss.

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.

AP2013/11/2008

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