Markets Full of Cheer

in Investing, Market Commentary by

Market Digest – Week Ending 12/26

Investors were cheerful for the holidays, pushing major US stock indexes to all-time highs. It was a slow news week with light trading volume. International stocks also gained, and the Russian ruble stabilized to a degree. Bonds declined modestly while oil continued to drop on increased inventories.

Weekly Returns:

S&P 500: 2,089 (+0.9%)
FTSE All-World ex-US: (+1.0%)
US 10 Year Treasury Yield: 2.25% (+0.09%)
Gold: $1,195 (-0.0%)
USD/EUR: $1.223 (-0.4%)

Major Events:   

  • Monday – China said it is investigating possible stock-price manipulation amid the large gains in the country’s equity market.
  • Monday – North Korea lost its connection to the public internet for several hours. It was unclear if the US government had any involvement.
  • Monday – Russian regulators seized control of OAO National Bank to secure trust of retail depositors.
  • Tuesday – Assets of exchange traded funds (ETFs) passed the $2 trillion mark.
  • Wednesday – Oil prices fell after US suppliers unexpectedly added 7.3 million barrels to inventory.
  • Wednesday – Sony said Microsoft and Google will make the controversial movie “The Interview” available online and that 350 independent cinemas will begin screening it.

Our take:

It was a quiet holiday week, and a nice one to be invested in stocks. Barring anything dramatic in the final trading days, the same could be said for 2014 in general. The largest drop for the S&P 500 was just shy of 10% (late September to early October) and major indexes should finish with double digit returns. We’ve grown used to this type of calm over the past few years, but historically most years are more volatile.

International stocks have not been as much fun to own. While volatility has also been moderate, the FTSE all World-ex US index is on pace to lose about 3%. Globally, US equity markets comprise about half of the world’s stock market valuation, so global stocks altogether are up about 5% for 2014.

This kind of return may feel disappointing to diversified investors who have grown used to more in recent years. But in a world with inflation running near 1% and a Ten Year Treasury bond yielding just about 2%, a 5% gain can still be considered a gift that shouldn’t be returned.

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Craig Birk, CFP®

Craig Birk, CFP®

Craig Birk leads the Personal Capital Advisors Investment Committee and serves as the Chief Investment Officer. His focus is translating improvements in technology into better financial lives. Craig has been widely quoted in the Wall Street Journal, Bloomberg, CNN Money, the Washington Post and elsewhere. Prior to Personal Capital Advisors, he was a leader within the portfolio management team at Fisher Investments, helping assets under management grow from $1.5 billion to over $40 billion. Craig graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.

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