PulsePoints > 2014 in review

Market ReviewVolatility was been rampant across all asset classes in 2014. The most recent pullbacks have been attributed to oil, or more specifically the ample supply. There is growing concern that the global economy is slowing, resulting in less demand for “black gold.” Oil has dropped over 40% this year, resulting in prices not seen since May, 2009. Economists predict that lower prices at the pump could add 0.5% annual growth to the GDP and help keep a lid on inflationary pressures.

Equities U.S. equities continue to be the favorite for investors. Despite headwinds from around the globe and several mini-corrections, equities finished 2014 in positive territory with the S&P 500 ending the year up 11.39%. Other markets have not fared as well as investors avoid risk-on trades. A few markets to note: Mexico -9.21%, Brazil - 2.91%, United Kingdom -2.71% and China (Hang Seng) 1.28%.

Fixed Income The ten-year treasury continues to hover in the 1.80% to 2.50% range. Bonds are benefiting from the improving dollar, which is up 11.02% YTD (DXY index). Countries dependent on oil exports are seeing their currencies decline in value along with oil prices. Russia is the most recent example with the Ruble recently trading at 73 per dollar. During times of uncertainty, U.S. Treasuries are the safe haven of choice, resulting in lower interest rates and a stronger dollar. The Fed is expected to remain accommodative with low interest rates until at least mid-2015, which will help bolster continued economic growth in the U.S. and abroad.

Economic Outlook The U.S. economy has picked up steam over the last two quarters of 2014 and unemployment is below the 60-year average. In the second quarter, the economy grew at annualized rate of 4.6%, compared to -2.9% in the first quarter. Third quarter GDP came in at annualized rate of 3.5%. Unemployment has dropped to 5.8% and is now below the 60 year average of 6.1%. With the labor pool tightening, talk turns to wage pressure and the potential for inflation.

Europe, on the other hand, continues to struggle. While consumer confidence is at an all-time high since the beginning of the recession, consumer spending has yet to pick up. There are signs of increasing loan demand for consumer credit and housing loans which should help spur economic growth.

Market Perspective Stocks should continue higher in 2015, benefiting from lower oil prices, wage increases, more discretionary income and low interest rates. Though developed international and emerging markets are today’s dogs, they could become the darlings of 2015. From a valuation perspective, stocks from these regions are undervalued compared to U.S. equites. There are signs that these economies are improving as a result of economic stimulus, which could be reflected in higher stock prices.

Top of Mind On behalf of all of us at Gill Capital Partners, we wish you and your family a happy & safe 2015! As you’re working on your New Year’s resolutions, especially those goals of improving your financial health, remember Gill Capital Partners takes a personalized approach to removing the financial chaos from your lives. Whether it is through Money Management, Retirement Planning, Tax Planning and Preparation, Education and College Savings, Insurance Planning, Estate and Multi-Generational Planning or Charitable Giving... we are here to help. Please let us know if you have any changes to your financial goals or if you would like to meet to discuss your financial plan. Together we can create a financial road map, making your financial resolutions come true.

BlogJames O'Brien