A December 22nd report from always erudite Source Research. titled the 12 charts of Christmas highlights the best performing investments of 2014 by asset class. The list notably includes real estate, equities and several classes of sovereign and corporate bonds. Not surprisingly, commodities is the worst performing asset class of the year, down a whopping 30% for the year.
the 12 charts of Christmas – Best performing investments of 2014
As Figure 3 from the Source report makes clear, U.S. real estate was by far the best performing asset class in 2014, offering returns in excess of 30%. U.S. equities and global real estate tied for second best performing asset class with a 13% return for the year. UK real estate came in fourth place with an 8% return, and Europe ex-UK real estate, dollar corp bonds and sterling gov’t bonds tied at 5th place offering a 7% return in 2014.
The 12 charts of Christmas #2 – Important events of 2014
Source analysts Paul Jackson and András Vig note the crisis in Ukraine caused a great deal of worry with Western economic sanctions having minimal impact on Russia’s actions. They point out that it is only the coincidence of much lower oil prices together with the sanctions that has brought Russia’s economy to its knees.
They also highlight how the “emergence of the Islamic State has also unnerved the West and Gulf Nations alike. Uncertainty and chaos in the Middle East gave birth to an organization that seems even more radical than Al-Qaeda.”
Jackson and Vig also take a lighter note when they say one of the biggest surprises this year happened during the World Cup finals: “As a demonstration of economic dominance, Germany thrashed hosts Brazil in the semi-final. They went on to beat Argentina (soon to default) in the final.”
The 12 charts of Christmas more – Projections for 2015
In making predictions for next year, the Source analysts note the high yield bond sector has been close to flat throughout 2014. They believe that will reverse in 2015, and expect high yield to outperform the rest of fixed income with stronger global economic growth providing support for the asset class.
Global equities have taken a breather this year, except in the U.S. where the buoyant health care and tech sectors gave stock markets a boost. Jackson and Vig anticipate better returns from equities in 2015. They note that stocks “tend to do well even when the Fed is tightening.”