The Biggest Surprises of the Year

Every year has its surprises, and 2014 definitely is no exception.

This year brought about what I call the “big four surprises.” I call them that because A) each was truly a big development that influenced the entire global market, and B) because nearly all of these were completely unexpected.

The big four surprises are the following:

1) Lower interest rates. At the beginning of the year there was near-consensus opinion from market observers that interest rates were going higher. The Fed was going to end quantitative easing (QE), and possibly even raise the Fed funds rate. Those two factors, along with a boost in global economic activity, would send interest rates, i.e. bond yields, much higher in 2014 — so the theory went. Well, that just didn’t happen. Part of the reason why is that global growth didn’t ramp up, and U.S. Treasury bonds became the safe-haven asset class for a lot of foreign capital. Also, interest rates (bond yields) in other countries such as Japan and many European countries were so low by comparison that U.S. Treasury bond yields actually seemed robust.

2) Falling oil prices. Hands down this year’s most unexpected development was the precipitous plunge in oil prices. Through the first six months of the year, the price of a barrel of crude oil had gone up about 11%. In the last six months, oil prices are down 46.5%. That incredible plunge in the value of oil has many causes, not the least of which is geopolitical moves by OPEC. Yet there’s also the fact that the North American energy renaissance created a lot more supply. Along with slowing global demand, we’ve seen oil prices tumble.

3) A rising U.S. dollar. Given the incredible levels of dollar creation via money printing by the Federal Reserve, most people thought the dollar would continue to get weaker and weaker. Well, in 2014, the greenback gained in strength relative to its foreign currency rivals. And while this may be more the work of weaker currencies such as the euro and the yen, there’s no denying that the greenback reemerged as a force to reckon with on the currency front this year. This development is both good and bad depending on which sector of the market you’re talking about, and for different country-specific equity markets.

4) Record high stocks. The final surprise of the year was the number of record highs set by the U.S. stock market in 2014. Despite several minor pullbacks this year, and one very big pullback in October, stocks managed to keep pushing the throttle. As of the close of trading on Dec. 22, the Dow was brushing up against the 18,000 mark. As money keeps pouring into stocks, equity values in the United States just keep getting inflated, and inflated and inflated. But what’s likely to happen to your money when this equity bubble bursts?

In 2015, the surprises aren’t likely to be the same. In fact, the opposite of the current circumstances could occur. Whatever happens, we’ll be here again to help you identify, understand, and act, in defense of your own money — and in your own best financial interests.

We’ll do that not only here in the Weekly ETF Report, but also at our new website, ETF University, or ETFU.com, and with our brand new podcast, which provides insights on tactics and strategies you can use to take advantage of whatever the market throws your way.

It’s going to be an interesting year, so be sure to tune in here every week for all of it.

Grinchy Wisdom

“It came without ribbons! It came without tags!”

“It came without packages, boxes or bags!”

And he puzzled three hours, till his puzzler was sore.

Then the Grinch thought of something he hadn’t before!

“Maybe Christmas,” he thought, “doesn’t come from a store.”

“Maybe Christmas…perhaps…means a little bit more!”

–Dr. Seuss, How the Grinch Stole Christmas!

If the stresses of the holidays start getting to you, remember the wisdom of the Grinch. Remember that Christmas, perhaps, means a little bit more.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Ask Doug.

In case you missed it, I encourage you to read my e-letter column from last week about the value of emerging markets this coming year. I also invite you to comment in the space provided below.