2014: The Year in Review

Every January, it’s customary to look back at the year that was. What were the highlights? What were the “lowlights”? What got us to where we are today? What lessons can we learn from the past twelve months?

When I think back on the past year, I picture a boxer. (Yes, you read that right.) The boxer in my imagination is an underdog engaged in a contest he or she isn’t supposed to win, taking punch after punch, jab after jab, knocked repeatedly to the mat. But, bruised and bloody though he/she is, the boxer keeps getting back up, each time a little stronger and more determined than before. And when the bout is finally over, the boxer not only wins … but even breaks a few records along the way.

What does this have to do with 2014?  Actually, a lot. Because in 2014, the markets were a lot like my metaphorical boxer.

Come back with me to January 2014.  The markets were just coming off a tremendous year, and many pundits were predicting that a correction was due.  (A correction, by the way, is defined as “a reverse movement, usually negative, of at least 10% in a stock, bond, commodity or index.”) In other words, the year started out as an underdog.  And at first, it seemed like their predictions would come true.  For example, the S&P 500® dropped over 5% between December 31 and February 3.  The Dow®, meanwhile, fell over 7% during the same period. This early volatility was largely due to fears that currency problems in developing countries would drag down the world economy as a whole, or that because 2013 was such a great year; we were somehow “due” for a bad one in 2014.

That was the first punch. But the markets got up … and got stronger. Another punch was expected from the Federal Reserve. For several years, the Fed had been buying bonds at an incredible level in a program known as quantitative easing. The point of this program was to inject money into the economy in order to keep interest rates low.  Lower interest rates make borrowing less costly, which means businesses and individuals can borrow and spend
more, thereby pumping more money into the economy as a whole.  This, of course, equals growth.

When chairwoman, Janet Yellen, announced early in 2014 that the Fed would finally wind down its stimulus program, some pundits were worried that it would cause interest rates to rise too quickly, destabilizing an economic recovery that has always been seen as fragile.  Well, the program ended in October and interest rates remained low.  They will undoubtedly rise somewhat in the future, but there was no sudden shock to the system as many feared. Meanwhile, the markets continued to see steady growth through the spring and early summer.  The Dow broke its own record by topping 17,000 for the first time on July 3rd.
But the year was far from over.

For the markets, September and October were rough. Stories about the Ebola epidemic in
Western Africa and the conflicts in Gaza, Syria, and Ukraine dominated the news.  Before long, the name ISIS was on everybody’s lips as fighting once again flared up in Iraq.  How would the markets react to it all? The United States had its own turmoil to deal with, too. The deaths of Eric Garner and Michael Brown, in July and August respectively, set off waves of protests across the nation.  The first confirmed cases of the Ebola virus on U.S. soil dominated the national discussion for a time. And midterm elections in early November had everyone wondering which party would take over Congress, and what it would mean for the markets moving forward.

What it would mean for the markets … that’s the key phrase.  Would the panic over Ebola affect the markets?  Would the fighting in the Middle East and Ukraine upset the markets?  Would protests and politics hurt the markets? Would we finally see a market correction? Would this be the knockout punch, the haymaker that stopped the markets cold?

For a time, it seemed like the answer was “yes.”  September and October were volatile months.

 But by the time November rolled around, the markets had mostly recovered, up and ready for another round.  Then came December, and falling oil prices. The markets dipped then too, as everyone adjusted to the idea of cheap oil and the impact it would have on the global economy.

But by Christmas, the markets were up again—and hitting record highs to boot. (For example, the Dow hit 18,000 for the first time ever on December 23.) The point of all this, «Salutation», is that the markets really are like my metaphorical boxer. They can be hit, and hit hard.  They can be knocked down.  In 2014, they frequently were.  But like a boxer, the markets know how to take a punch, and they always get up off the mat. Sometimes it takes a while.  Sometimes it seems like economic storm clouds will last forever. But the events I described above are temporary. Most have long-lasting implications.  Some are undeniably tragic.  But economies recover.  The human race recovers.  And we move forward.

There’s a word for this phenomenon: resilience.



At the beginning of this letter, I asked what lessons we could learn from 2014.  To me, this is the lesson: life will always throw punches.  Some punches leave us bruised and dizzy for a time, but nothing is permanent.  Storm clouds always make way for the sunshine.  The night always bows before the dawn.

So as we move further into 2015, I’m going to do my best, both personally and professionally, to remember that I can and will roll with life’s punches. To be resilient. Boxers and markets fall, but they also get back up.  And so will I. And, so will you.

Here’s what I predict for 2015: there will be volatility, both in the markets and in our lives.  I don’t know how long it will last or what will cause it.  But I do know that we will be resilient and get through it—together.

One last thing. As you know, there’s no better time to plan your year than now.  To that end, I’d love to sit down with you and plan for the months ahead.  We can review your current strategy and portfolio.  Do we need to make changes?  Are you still on track to reach your goals?  These are the questions to ask and the issues to focus on.

So please give me a call at 301-791-7910 or shoot me an e-mail at jeff@bowersinsurance.com  We’ll set up a time to talk, and together, we’ll make 2015 exactly what you want it to be. On behalf of all of us here at Bowers Advisory Group LLC, we hope you had a great 2014! Here’s to an even better year to come.

Happy New Year and may you have a prosperous 2015!