December 11, 2014
Can you believe 2014 is just about over? The holidays are upon us and everyone is wrapped up in shopping and planning family events. The kids will be out of school soon and before we know it we will be counting down the New Year.
With only a handful of trading days left to us, I thought I would take a look at how various markets have performed year-to-date. It's a mixed bag for certain.
Let's begin here at home with a look at sector performance. Healthcare and utilities carried most of the weight with tech putting up decent numbers as well. Energy is definitely the elephant in the room with oil priced at around $61/bbl. While I love saving at the pump, this has been a rough period for oil related stocks.
(Click photos to view details.)
This next chart compares US companies of various sizes. Large-caps outperformed their mid-cap and small-cap brethren by a sizable margin. This to me suggests cautious optimism in the US. Investors are buying, but are focusing on large, stable companies. No one seems to be in a rush to own smaller companies with larger potential growth due to the inherently higher risk that typically accompanies them.
Let's go abroad. This is whole different ballgame. International developed markets did not fare well this year. With the exception of China and Belgium, it is readily apparent that the rest of the world did not enjoy the returns that we saw here in the US. Japan did not keep up with its neighbor China. Mexico gave back gains from the first half of the year and then some. Emerging Markets as a whole had a break-even year.
Finally, we'll take a look at fixed income. Yields were up across the board. This should come as no surprise considering the Fed finally announced the discontinuation of its bond-buying program, aka Quantitative Easing or Stimulus. Remember when looking at this chart that higher rates translate into lower bond prices. I was actually pretty impressed with the market reaction to the Fed's announcement. Rates are rising, but it seems to be a slow and orderly march toward normalization.
If anything, this should all accentuate the importance of diversification. Perhaps next year healthcare will cool off and energy will have a huge rebound. Maybe we will see money flow into small-caps while large-caps muddle along. It's possible that investors could step in and declare that Europe is 'cheap enough' and those indexes will catch up with the US. If the economy weakens, the Fed might decide to delay any rate hike sending yields back down. Everything moves in cycles. The problem is that we don't have a crystal ball to tell us when. This is why it's so important to invest globally in the right proportions to fit your risk-tolerance and goals and then to stick to your long-term plan.
Sam DiNorma, Financial Advisor
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).