2014 Review: Asset Classes & Bonds (01/09/2015)

Continuing with the 2014 year-in-review series, I am going to take a look at broad asset classes in this post. Similar to 2013, domestic stocks were best performers (Exhibit 1). The dollar also had a great year with a steep advance starting in late June. Most of the fixed income investments had a decent year, while foreign stocks lagged once again. Commodities overall and crude oil in particular had a horrible year!

Exhibit 1 – 2014 Performance for Major Categories


Digging a little deeper into domestic stock market, Large Caps (particularly growth) had a great year (Exhibit 2). Midcap did ok (especially on the value side), while small companies lagged significantly. In fact, as late as December 16, Russell 2000 ETF (IWM) was negative for the year and was saved by a 6% rally in the last two weeks.

Exhibit 2 – 2014 Style Box Performance


Switching gears to fixed income, there was somewhat of a reversal of fortunes – Treasuries and Munis that got hammered in 2013 had a big rebound which came as a surprise to most (Exhibit 3). High Yield didn’t have a good year, driven by a large energy weight in the index. As oil prices took a dive in the second half of the year, stocks AND bonds (most of which are junk) of energy companies followed. International bonds came in negative but that can largely be attributed to the strong dollar. Vanguard’s BNDX which hedged its currency exposure had a pretty decent return of 8.7%.

Exhibit 3 – 2014 Performance by Fixed Income Groups


In the next post, I will take a closer look at sector performance in 2014.


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