2013 turned out to be an exceptional year for equity markets, which drove strong investment returns for clients. Our U.S. portfolio, in Canadian dollars, delivered returns over 40% while Leith Wheeler clients also enjoyed both Canadian and International stock returns close to 25%. Bonds delivered slightly negative returns given the increase in interest rates over the year, partly due to a brightening economic outlook. While these returns are encouraging, the natural question becomes what to expect in 2014 and beyond.
We expect global economic growth to continue to improve gradually, increasing 2-3% per annum. The U.S. housing market continues to gather forward momentum, as new home starts of over a million homes annually represents its best performance since 2008. Also, U.S. consumers have made substantial progress in improving their balance sheets, despite reasonably tepid job growth and income gains. Consumer spending has ticked up and retail sales are growing. Auto sales are on track for 17 million in annual sales, a level the U.S. has not seen since 2007
While the U.S. recovery is the brightest spark globally, part of the improvement will also come from Europe, which despite pockets of weakness, is starting to grow again after its deep recession. The recovery is being driven by the industrial heartland in the north, but even in southern Europe, Italy and Spain are no longer contracting as badly and are showing some signs of very gradual renewed growth. All of this translates into expected growth in the 1% per annum range for the Eurozone.
Emerging markets and China, which are critical for our Canadian natural resource companies, will most likely grow in the 6-8% per annum range. While lower than the past rates many have grown accustomed to, these levels are still quite reasonable in our view. The flip side to relatively slower growth from emerging markets and China is that developed countries will no longer have to contend with rising commodity prices. For example, China's economic engine, which fueled increased
commodity demand, hurt both capital spending and consumers here at home. A more reasonable growth trajectory for the emerging markets and China will mean less competition for the natural resources required to fuel our own economic growth and will act as less of a tax on domestic consumers.
The biggest determinant of global growth is the potential impact from corporate investment in plant and equipment. Business confidence has been somewhat contained due to tepid sales growth and uncertainty over the U.S. budget and debt ceiling. However, there are some encouraging signs that things are getting better, particularly in the oil and gas sector and some parts of the U.S. manufacturing sector. Even with an improvement from depressed levels, capital spending is expected to grow at a slower pace than in previous recoveries.