A 2014 Investment Market Recap

in Market Commentary by

Market Digest – Week Ending 1/2

A sell-off late on New Year’s Eve left stocks down for the week. Once again, international stocks lagged. Oil prices continued to decline. For 2014 as a whole, headline numbers were somewhat deceptive. For example, the S&P 500 rose 13.9%, but almost no one remotely diversified fared so well. The FTSE All Share ex US index lost nearly 5% for the year. US REITs had a banner year, but commodities and anything else international generally lost ground.

Weekly Returns:

S&P 500: 2,058 (-1.5%)
FTSE All-World ex-US: (-2.1%)
US 10 Year Treasury Yield: 2.11% (-0.14%)
Gold: $1,195 (-0.0%)
USD/EUR: $1.200 (-1.9%)

Major Events:
• Monday – Greek stocks finished down 4%, after having dropped 10% at one point due to a failed Parliamentary attempt to elect a new president and consequent snap elections scheduled for January.
• Tuesday – Debris from missing AirAsia plane found.
• Wednesday – Russia injected more than $700 million into Gazprombank to assure depositors.
• Friday – The US issued sanctions against North Korea in response to its alleged hacking of Sony Pictures. The sanctions primarily target arms exporters, which are a major source of foreign currency for the country.
• Friday – The first trading day of the New Year saw US stocks finish flattish. The US dollar gained against most currencies and nearly broke the $1.20 level against the Euro.

Our take:

2014 generated mixed emotions for most investors, but there was little to be upset about. The S&P 500 posted its third consecutive double-digit return. It’s the fifth time a streak of that nature has happened in the last 100 years – so while it’s not easy to do, it’s not that rare either. For what it is worth, stocks were up the next year after three of the five times, and in all cases by double digits yet again.

On the other hand, owning anything other than Large Cap US stocks or US REITs felt mildly disappointing. Small cap stocks were up only about 5%, and international stocks were down. Gold was slightly negative and Commodities got crushed.

An enjoyable aspect of 2014 was that outside of commodities, volatility was very low. There were no drops in the S&P 500 greater than 10%, and it felt like bonds ticked slowly higher all year long. Putting it together, it was a year where most diversified investors should have walked away with a return a few percentage points higher than inflation – and with nothing to lose sleep over. There’s nothing wrong with that.

Happy New Year from all of us at Personal Capital.

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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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