2014 Market Recap and some thoughts about 2015.

2014 Market summary

 

As 2014 comes to an end it has been another good year for the market and the economy. 2014 began with plenty to worry about including a sluggish economy, a market that saw outsized gains in technology and biotechnology, geopolitical tensions around the world and the ineffectiveness of our political process. Despite all those concerns investors grew more optimistic as the year progressed and the Standard and Poor’s 500 continued to trend upwards. For most of the year. The market was rising slowly until September-October where a sharp correction brought the market near where it started in January. After that sharp and quick correction the market rebounded strongly and as the year comes to an end   the year-to-date gains are around 14%.

 

During the year there have been some surprises in the market most notably the sharp decline in West Texas Intermediate Crude to   around $57. Even though the major economies were slowing demand was expected to be flat as demand from the emerging markets was expected to keep prices around the beginning-of-the-year levels and the instability in the Middle East had the possibility of reducing production. One development that has garnered a lot of attention in the United States in the move towards energy independence in North America and a less reliant on imports of foreign oil. This has primarily been achieved through an increase in domestic production through a process known as hydraulic fracking, which is a relatively expensive process. However, as oil prices have tumbled new capital spending projects to increase fracking have been put on hold and there is a possibility that current output may decrease due to declining profitability.

 

Also surprising this year was the drop in interest rates both in the United States and around the world. Currently the U.S. 10-yrr Treasury note is trading around a yield of 2.1% and many sovern bonds in Europe are trading at yields that were unlikely a couple of years ago. Many market commentators were skeptical that China’s economy was growing at seven plus percent but few thought that the Shanghai composite (A-shares) would be up around 27% this year, outperforming every developed country market. While Japan’s Nikkei rose, the yen fell sharply which should have helped Japanese exports, but the economy still fell back in to recession despite an unprecedented amount of fiscal and monetary stimulus.

 

One final unexpected surprise in the market this year was the relative strength of the U.S. dollar against major currencies. As of this writing the dollar traded at 1.20 versus the Euro and after a sluggish start to the year the economy has gained momentum which expanded at 4% in the third quarter faster than any other major economy except China. In addition, the improvements in the budget deficit and the relative safety of U.S. assets drew capital inflows from all over the world which further added to the dollar’s strength. With the dollar gaining strength there is concern that U.S. exports will decline but exports make up a small portion of GDP and the continued fall in oil prices should help the trade balance. The strength of the dollar is likely to continue into 2015, as the U.S economy remains strong compared to the Eurozone, Japan and other major economies.

 

Below are the top 3 best and worst performing sectors for 2014.

 

Top Performers:

 

1. Health Care +29.5%
2. . Transportation +25%
3. Utilities +22%

Worse Performers

 

1. Energy -10%
2. Basic Material +2%
3.  Conglomerate +6%

Source: http://www.Briefing.com

 

2015 Thoughts

 

For 2015, the markets will be entering its sixth year of this current market cycle typically lasting between 5-7 years of trying to achieve positive returns since the low of 2009. Overall with favorable macroeconomic factors, a still accommodative fed, corporate profits still growing and lower energy prices, I expect equity markets to have another positive year. Although I think returns will be more modest than in recent years say in the high single digits, markets should be higher in one year. There are risk to this positive call with continued geopolitical tension around the world, a risk of Europe slipping back into recession, and perhaps the fed being too aggressive in its monetary policy, thus I expect markets to have periods of high volatility throughout the year.

 

All for now and Happy Holidays!

 

 

December 12, 2014

 

Market Summary

 

This week the market finally came under selling pressure as all the major indexes are down over 3% for the week. Prior to this week the market had been trading quietly in a relatively tight pattern however, the market breath (Advance/decline) has been showing weakness across many sectors and a rolling pullback was underway even though the Dow and SP were achieving record highs. The drop has been largely due to the continued intense selling in crude oil, some disappointing economic numbers, and few stocks and sectors have been making much progress in recent weeks. Overall it does look like the heavy selling this week is a sign of distribution and the market is likely to trade in a tight range for the rest of the year and should find support at its 50 day moving average around 2,000 on the S&P 500. As the holiday approaches, trading volume is likely to remain light and any major move in the market in either direction would be surprising. Thus a quiet period is likely to persist for a few weeks until 2015.

 

Next week I will post my market recap for 2014 and some thoughts about 2015.

 

All for now.

 

December 8, 2014

 

As 2014 comes to an end the financial markets are on track for another positive year following a strong performance in 2013. Although this year has seen more sideways action with periods of volatility the overall long-term trend of the market remains in an uptrend looking at its 40-week moving average. After the mid October lows that took the major averages down about 10 percent in a month, equities have rallied sharply and have set new highs and are poised to finish the year with solid gains.

 

For an investor this year has been confusing and not a lot of money is being made on the long side as stocks have fluctuated and have mostly traded sideways as compared to 2013. Despite the sideways action, there are a few sectors that have done well like technology, utilities, consumer staples and other defensive growth sectors such as REITs. The economy has improved at the labor market is now showing favorable trends that are likely to continue into 2015. For an investor investing in the equity market one has to realize that investing requires one to have some set rules that he or she follows and understand that sometimes the occasional trade may yield losses even if the analysis is correct. What is most important however, is keeping losses small say no more than 15% from the original purchase price and not to “fall in love” with a stock just because you may like there product or service. For an investor who does not want or have the time to dedicate to monitoring their investments on a regular bases and would like to do it them self perhaps investing in an index fund or (exchange traded funds) may be a good strategy in getting broad exposure to the market or specific sectors without worrying about the volatility of a single stock. These ETFs try to replicate the returns of the index they are benchmarking against and offer moderate capital appreciation, dividends and low fees which can provide a decent return over the long run. There are other strategies that can be used to invest in the equity market beyond buying a stock or ETF and those strategies are only suited for experience investors. One thing I have learned is to invest in any asset a combination of fundamental and technical analysis usually works best because sometimes one set of analysis may look correct but yet the security is going down and this can also apply to the overall trend of the broad market. There are other indicators that I keep track of to gage the overall trend of the market and stocks but I will discuss them in a future post.

 

All for now.

Sanjeev Mistry

 

 

The market finished the week with modest gains and the major averages  performed similarly. In the last couple of   weeks the market has been

Consolidating

its strong gains from the mid October lows and the indexes look in decent shape both on a shorter and longer term bases. Although most sectors have traded in a narrow range, few sectors have given up much ground with the exception being the energy sector which continues to be under pressure due to lower oil prices, excess supply and overall lower demand from the global economy

 

This weeks’ major economic news came on Friday with the Labor Department reporting that the U.S. added 321,000 jobs in November and further illustrates that the economy is picking up steam. Also in the job report is the increase in average hourly earnings which rose by 0.4% and was better than expected. This is important because if hourly earnings are rising then overall income will rise and since consumers make up nearly 70% of GDP, this will lead to an increase in economic activity. This also means that the Fed will likely start raising short term interest rates sometime in 2015.

 

 

All for this week.

 

 

 

 

A Financial Blog about Financial markets, economics and other topics.

Sanjeev Mistry

December 4, 2014

 

My name is Sanjeev Mistry and yes I am blind but have a strong passion for investments, economics and business. My background is in Finance particularly in investing but in general I have good knowledge in business related issues. I got my MBA in Finance and have been investing in the financial markets for over ten years and have done okay but over time I have learned a lot about money management, planning for the future and know that sometimes the unexpected can change the trend of the market and economy faster than any policy. I have worked in a large public pension institution for the city of Los Angeles and perhaps the biggest thing I have learned is the importance of well-defined investment strategies and complying with set ranges in asset allocations. In this blog I hope to share some of the things I have learned from my experiences in investing given my disability, portfolio management strategies, asset allocation and other business topics.

 

First, before discussing portfolio management or asset allocation, one must realize that before investing in any asset, he or she should take a comprehensive look at their overall finances. For example do they have enough money to cover basic expenses, pay the mortgage, save a portion of their earnings for a “rainy day” etc.? Investing should only be done if one has some excess cash that they will not need in the near future and can afford to invest over a longer term horizon. Note: one point I must make short term investing will not be the primary focus of this blog. Next once the individual has done an overall assessment of their finances perhaps using a financial adviser then additional questions need to be answered. For example what are my goals in investing (I.E) what level of return am I willing to achieve for a given amount of risk, risk tolerance, how many years do I have of “peak earnings” left, and what kind of assets would I feel comfortable investing in. Once these questions are answered then an individual by him or herself can construct an investment strategy or with assistance from a financial adviser can develop a plan to help the individual reach their goals.

 

All for now, next week I will discuss some thoughts about the current market and some comments on U.S. equities strategy.