A strange year 2014 has been. Coming off a robust 2013 many of the financial markets had a slight hangover in 2014.
13.70% S&P 500
4.90% Russell 2000
-4.85% MSCI EAFE
-1.80% MSCI Emerging Markets
6.00% Barclay Bond Aggregate Index
The S&P 500 had the best performance of the group which mainly represents large-cap US stocks. The challenging question is why small-cap, mid-cap, international, and emerging markets lagged? Just don't go selling off and chasing returns yet, when we look back over the last 10 years the story is much different.
Above is a slide from JP Morgan's Guide to the Markets 2014 Q4 edition.**
Looking back over the last 10 years you'll notice that MSCI Emerging Markets (avg 8.8%/yr), REITs (avg 8.3%/yr) and Russell 2000 (avg 7.8%/yr) were the best performers! While they may be some of the dogs of 2014 I don't think it's time to dump them. As you probably know this is making a case for diversification and stay patient.
Somethings to think about for 2015:
Drop in Oil- Since OPEC has flooded the market it has driven down the price of oil which in turn has reduced fuel costs. Many analysts are expecting the cost savings will directly affect consumers and businesses. Consumers will have more money in their pocket to spend or invest. Businesses should have a more profitable 2015 with fuel costs reduced.
Interest rate rises- The FED has been hard to predict but they have tapered quantitative easing (QE3) leaving us to believe that interest rate hikes are next. The economy had a 5% GDP Q4 which seems to point the economy is humming. It seems that the FED has finally decided to act as they announced in the meeting minutes they would raise interest rates later in 2015.
As always if you have any questions please email or call me. Additionally I am looking to expand my business so please keep me in mind if you know someone I can help out. Referrals are always greatly appreciated.
VYou can view your performance reports from Albridge at www.mainaccount.com/ifg. If you have NOT registered recently you will need to go through that process!
1. Past performance is not indicative of future results.
2. Diversification does not guarantee profit nor is it guaranteed to protect assets.
Successful investors have to become successful savers first.
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When markets go down:
Invest more! When the market declines it's a good time to increase 401k contributions and/or put cash to work.
Don't Panic! When markets go down people's natural reaction is to panic and change things. If you have a good allocation and financial plan weather the storm.
Market Performance 2014*:
4.78% S&P 500
-8.57% Russell 2000
-6.18% MSCI EAFE
1.21% MSCI Emerging Markets
5.14% Barclay Bond Aggregate Index
Data from JP Morgan "Market Insights"
*Year to date as of 10/13/2014