Market Beat: In 2015, keep eye on interest rates, oil price
Overall, 2014 was a good year for the markets and our economy.
Inflation has been tame with the CPI up only 1.3 percent. GDP grew at a 5.0 percent annualized rate in the last quarter, and the unemployment rate is at 5.8 percent.
Interest rates have remained low, with the yield on the Ten Year Treasury at 2.20 percent.
US equity markets performed well. The benchmark S&P 500 was up 11.4 percent and hit a new record high of 2,094.
The Dow Jones Industrial Average also fared well, with a gain of 7.5 percent and a new record of 18,103.
The high point for the tech heavy NASDAQ was 4,815, which is the highest it has been since March of 2000, before the dot com bubble burst, when it recorded its all- time high of 5,132.
The best performing stock market in the world was the Shanghai Composite, which had a gain of 52 percent, the majority of which occurred in the last few months of the year.
Europe posted modest gains with the STOXX Europe logging a 4.4 percent increase.
In the currency markets, 2014 was also a very good year for the US Dollar, which had its best year in 10 years.
The DXY, US Dollar Index, had a gain of 12.8 percent. Meanwhile, the Euro dropped to a two year low, down to $1.21.
The commodity markets were a different story — gold continued to decline, posting a modest drop of minus-1.5 percent.
The big story of the year in commodities was the price of oil, which plunged 46 percent. The fall in oil prices lowered the average price of unleaded gasoline in the US to $2.26 per gallon at the end of the year.
That’s a drop of $1.06 per gallon over the course of the year, which has the effect of freeing up about $150 billion to be spent elsewhere in the economy.
It should be an interesting year in 2015. A couple of things to watch will be interest rates and the price of oil.
There has been a tendency in the past for years ending in the number five to outperform any other year of the decade going all the way back to 1885, according to the Stock Trader’s Almanac.
I suspect that this phenomenon may be another case of, “correlation does not imply causation,” but let’s hope for a good year anyway.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://www.sellacalloption.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.
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