by Greg Naylor December was an eventful month in the US financial markets. On an economic front, the Fed unexpectedly slowed QE and the holiday season showed traditional retailers losing ground to online shopping. Stocks continued higher, and bonds closed out a decidedly lackluster year. Obamacare saw enrollment spike at the last minute as the deadline to avoid the tax penalty came and went. Here is what happened in the capital markets, by the numbers:
Stocks & Bonds
The US stock market had its best year since 1997, as measured by the S&P 500 Total Return Index. Bonds had their first losing year since 1999, as measured by the Barclays Aggregate Bond Index. Some international stocks also had a good year, although emerging markets largely underperformed as commodity prices suffered. Inflation remains muted. By the numbers:
| S&P 500 Total Return | MSCI EAFE | BarclaysAggregateBond | Unadjusted CPI | |
| December | 2.53% | 1.42% | -0.56% | -0.20 |
| November | 3.05% | 0.56% | -0.37% | -0.26 |
| YTD 2013 | 32.38% | 19.41% | -2.03% | 1.23% |
Commodities & Currencies
NYMEX crude rose 5.82% in December, closing the year almost flat. Gold had its first losing year in more than a decade, declining about 28%. The dollar index was essentially unchanged in December, and is also basically unchanged year-to-date.
Economy
The Department of Commerce released its third estimate of 3rd quarter GDP. The first estimate was that the U.S. economy grew at a 2.8% annual rate in the 3rd quarter. The second estimate was 3.6%. The third estimate was a whopping 4.1%. Increases in personal consumption and nonresidential fixed investment were larger than initially estimated.
The Department of Labor will release its estimate of December unemployment on January 10th. Significantly, the emergency unemployment benefits enacted in 2008 expired at the end of December. These benefits provided for unemployment compensation to be paid for up to 99 weeks, or almost two years. Due to data gathering methods, it is possible that this will actually reduce the official unemployment rate going forward in 2014. However, it also represents reduced government spending, which could provide a recessionary shock to the economy, albeit a small one. Something to keep an eye on in the US financial markets going forward.
The Institute for Supply Management had continued good news, reporting that December’s manufacturing PMI was 57, down only slightly from November’s 57.3. A reading above 50 indicated economic expansion.
The National Association of Realtors (NAR) reported that the annual rate of existing-home sales in November fell by 4.3% from November 2012, the first year-over-year decline in 29 months. This likely shows the effects of rising mortgage rates. The national median price rose from the prior year by 9.4% to $196,300. Foreclosures and short-sales, as a percentage of overall sales, were at 14%, no change from October.
Summary
2013 was a decidedly good year for most patient investors, who have seen the S&P 500 more than double from its low in January 2009. Happy New Year!
This material was prepared by Greg Naylor, and does not necessarily represent the views of Woodbury Financial or its affiliates. This information should not be construed as investment, tax or legal advice and may not be relied upon for the purpose of avoiding any Federal tax liability. This is not a solicitation or recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. The S&P500, MSCI EAFE and Barclays Aggregate Bond Index are indexes. It is not possible to invest directly in an index.
Investing involves risks and investors may incur a profit or a loss. Past performance is not an indication of future results. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Data Sources:
- www.standardandpoors.com – S&P 500 information
- www.msci.com – MSCI EAFE information
- www.barcap.com – Barclays Aggregate Bond information
- www.bloomberg.com – U.S. Dollar & commodities performance
- www.realtor.org – Housing market data
- www.bea.gov – GDP numbers
- www.bls.gov – CPI and unemployment numbers
- www.commerce.gov – Consumer spending data
- www.napm.org – PMI numbers
- www.bigcharts.com – NYMEX crude prices, gold and other commodities
- https://data.bls.gov/timeseries/LNS11300000 – Labor participation data
Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.
