2014 was another strong year for equities. The S&P rose over 12% and the DJIA rose over 8%.Those investors whose risk tolerances and portfolios included equities in their portfolios saw strong returns. The year 2014 was a timid and confusing one for the bond market. Interest rates remained artificially low because of the Federal Reserve’s “Quantitative Easing” policy, and continued to remain low even after its culmination. The Federal Reserve hinted at possibly increasing rates but did not do so in 2014.
So how do you prepare for 2015?
Planning for 2015 may be more confusing than 2014 because investors still need to be watchful of interest rates and a stock market that is at or near record highs. 2015 also brings a change in the political landscape that further complicates concerns. Many experts are predicting that volatility may return during the year. Our goal is to attempt to provide clients with guidance and support.
5 things to watch for in 2015
- Potential interest rate changes
Economists generally expect that interest rates will rise in 2015. They predict that the Federal Reserve will raise the federal-funds rate from its current 0% to .25% by mid-2015 with the benchmark rate possibly reaching 1% by year end. The health of the economy, geopolitical activity and inflation concerns could influence the timing and size of any interest rate movement. For 2015 investors should keep a watchful eye on the Fed. Source. (Source: Barron’s 11/2014)
- Stock market valuations
With equity markets near all-time highs most analysts are saying that stocks are neither cheap nor overly expensive at today’s current P/E multiples. Although the bull market is now six years old and the fourth longest in history, with interest rates remaining low most market strategists feel the overall market should rise again this year. They feel the lack of attractive alternatives and a stronger U. S. economy will help the market in 2015. (Source: Barron’s 12/2014)
- New political landscape
In November of 2014 voters gave Republicans the majority of both the Senate and the House of Representatives. President Obama and Senate majority leader McConnell pledged to try to work together. House Speaker Boehner said that “finding common ground is going to be hard work, but it will be even harder if the president isn’t willing to work with us. President Obama said, “It is time for us to take care of business.” Obviously, this is an area that investors need to keep an eye on. (Source: Barron’s 11/2014)
Investors are starting to worry more, which means that we can have a return to market volatility in 2015. During the final quarter of 2014 events like falling sovereign yields to widening credit spreads, combined with declining inflation, falling oil prices and a soaring dollar, led to a more volatile equity market. This is an ideal time to review your holdings in preparation for any potential extreme stock market swings in 2015.
- Your personal situation
Your personal situation is our highest concern. Our primary goal is to keep our clients informed throughout 2015. If you find you need to meet with us before your next scheduled review please call our office and we will be glad to schedule time together. Once again we thank you for the opportunity to help you with your financial goals.