From the Age of Recovery to the Age of Divergence, we look forward to 2015 with an overview of the investment world and explore the different themes that will matter in the New Year.
Looking at the year in review, central bank and economic divergence have been the underlying themes in 2014, and these are having, and will continue to have, significant influence on financial market direction. Going into 2015, how does that impact your investments, and where should you focus your attention? This is the focus of BlackRock’s 2015 Market Outlook.
Market Realist – 2014 was a year with soaring equity markets, plunging gasoline prices, a growing and spirited US economy, and low interest rates. Indeed, 2014 has been a phenomenal year for the US! As the sun sets on 2014, it’s time to look back and study the year in review.
US stock markets kept ticking!
Despite the countless geopolitical tensions—ISIS, the Ukraine-Russia (RSX) conflict, fighting in Gaza, the spread of the Ebola virus, and aircraft disappearing—US equity markets continued to gain ground. The S&P 500 (SPY) ended the year up 11.4%. The Dow Jones Industrial Average (DIA) achieved record highs more than 50x in 2014. NASDAQ (QQQ) also ended the year hovering around its 14-year highs. In 2014, the S&P 500 had positive annual gains for the third year in a row. The previous graph charts the three major indices’ gains in 2014.
The US dollar increased
In 2014, one highlight was the resurgence of the US dollar as one of the most preferred currencies in the world. Falling oil prices and the US economy’s strength, in a world with sluggish growth, helped the US dollar climb to its highest levels since 2006. The previous graph charts the US dollar’s upward trajectory.
Oil—how the mighty fell!
One of the recurring themes of 2014 has been the slump in oil prices (USO) (BNO). Oil prices crashed from $114 in April to below $60 at the end of the year. Sluggish demand, combined with the global oil supply glut, contributed to the spectacular drop in crude oil prices. Although the drop is helping the net oil importing countries, the news isn’t good for oil exporters—like Russia, Nigeria, and Venezuela. The fall in crude oil prices also caused a drop in gasoline prices—a boon for the US consumer. The previous graph shows how oil prices dropped to their five-year lows in 2014.
In the next part of the series, we’ll continue to elaborate on the themes in 2014 and the future outlook for investors.