The end of the year went out without a bang. The S&P 500 climbed 11.39% over the year which is a far step from the 29.60% return we saw last year. The year was relatively quiet expect for the correction we experienced in October. One thing we noticed in 2014 was the “V” shaped moves that happened through the year. The moves lower were violent followed by a climb that was equally impressive. When moves like this happen it creates a lot of pain in the markets as traders get pushed through their threshold only to see it quickly reverse without them.
2015 U.S. news should be centered on the Fed rate hike. This has been a long time coming and it will be good to get this piece of news behind us. We expect inflation to not climb as fast as predicted especially with oil prices so suppressed which should push the rate hike to later in the year. Until then every Fed Meeting should be met with increased volatility and uncertainty in the markets.
Oil prices continue to make new lows with no support from foreign nations in sight. Depressed oil prices put pressure on emerging markets, oil exploration, and US shale.
Another move we have to look forward to is the Europe QE. Weak data continues to come out of the European nations as growth begins to slow. This is all pointing towards stimulus from the ECB which is supported by ECB President Mario Draghi. Draghi is busy trying to win over Germany to launch into quantitative easing, so expect a measure to come out in the first quarter of 2015.
The last week finished lower, down 1.5%, even though it was a holiday week. Light trading volume was the name of the game for the last two weeks and it was apparent, especially in volatility. With a light move down on Wednesday we saw a +10% jump in the VIX. On Friday most of that move in volatility came back out. This move does not appear to be a foretelling of rough times ahead, but light volume moving the market without resistance.
The market, S&P 500, is oversold and on support. This upcoming week would be a good week for a bounce as traders begin to funnel back into the market. As such we will begin to put on positions for our February portfolio this week.