Last blog of the year, and yep, you guessed it, it’s time for the “Year In Review”! 2014 was a crazy year in the market. Year to date (as of 12/22/2014), the S&P 500 is up 14.73% and the Dow Jones Industrial Average is up 10.88%. (On a side note, as I write this blog, the Dow has crossed over 18,000 for the first time ever!) But this doesn’t tell the whole story. While we never reached official correction territory (a 10% drop) we did pull back 7.4% in September. This is in addition to the four other dips of 4% or more that we experienced during the year.

The bond market surprised just about everyone by bouncing back with a 5.86% year to date gain (as measured by the Barclays Aggregate Bond Index). With the gradual ending of the Fed bond purchasing program (QE3), it was expected that rates would start to rise. However, the ten year Treasury yield, which opened the year at 3.03%, closed yesterday at 2.25%. (Remember, lower bond yields = higher bond prices).

The year was full of market moving events and information. One of the most encouraging data sets was GDP. First quarter GDP was actually negative due to the Polar Vortex that crippled much of the country last winter. Now, if you know me, you’ll know that I was skeptical that a hard winter storm could cause such disruption in a $17 trillion economy. But, as the year went on, subsequent GDP reports (as well as other economic data) proved that to be the case. Our economy grew by 4.6% and 5.0% in the second and third quarters, respectively. Impressive numbers, and we’re probably still looking at a GDP for 2014 around 2.5-3.0%.

World events caused great headline risk this year. The “non-invasion” of Crimea by Russia and ISIS’s march towards Baghdad were just two geopolitical events that shook the market. Economic conditions in Europe put pressure on the world economy as it seems like they might be headed back into recession. China is still growing but at a slower rate. And the outright collapse of the Russian ruble and recently forced the Russian central bank to hike its benchmark interest rate from 10.5% to 17% overnight.

The U.S. Treasury perplexed the market by dropping in yield despite the end of QE3 and a stock market that continued to skyrocket. As I’ve written before, these two forces seem to contradict each other in the short term, with the stock market signaling good economic growth and the bond market pointing towards a slowdown.

Perhaps the most interesting market story this year was the tremendous decline in the price of oil. After hitting a high of $107 in the summer, a barrel of oil closed yesterday at $55.26. As with most things in economics, this precipitous drop had many causes: over supply, decreasing demand, and U.S. Dollar strength among other things. While lower oil (and gasoline) prices are good for the American consumer, the concern is that the demand destruction will cause a worldwide recession. In which case, we do need to be concerned with the economic health of our trading partners.

So, what does 2015 look like? I think the volatility that we saw this year will stay with us. I don’t believe that the stock markets are overvalued, so I think we will see some growth in the averages as the economy continues to grow. Possibly in the mid-single digits. The Fed will probably start to raise the Fed Funds (short term) rate. However, I don’t believe the longer term rates (i.e. the ten year and thirty year Treasuries) will move up that much.  With worldwide rates extremely low and the ECB looking to start their own quantitative easing, I can’t see our interest rates moving drastically.

As we head into a new year, it’s a good time to make sure your portfolio is still appropriate for your situation. Perhaps there have been changes in your life that need to be addressed. Or, if you haven’t checked for a while, your portfolio may need to be rebalanced. If your investments are at Verity, please feel free to contact us at 206-361-5312 to set up a review. And, if they are held somewhere else, we’d be happy to give you a second opinion on your portfolio.

HAPPY HOLIDAYS!!!

Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Verity Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.

Gavin Chinn, CFS* Financial Advisor

Check the background of this investment professional on FINRA’s BrokerCheck.

An Investment Advisor registered through CUSO Financial Services, L.P., Gavin has 22 years of experience as an advisor in the Puget Sound area.

“I believe every client is unique and deserving of a personalized financial plan that will help them reach their individual financial goals. Before I make any recommendations, I like to get to know my clients. By asking the right questions, and developing an honest, trusting relationship I can really get a sense of what’s going to work best for them.”

Gavin graduated from the University of Washington with a BA in Business Administration and started his financial career with US Bank in the Investment Department. Prior to joining Verity in 2006, he spent eight years with Piper Jaffray.

So what is Gavin’s vision for his dream retirement?

“My dream retirement would be absolutely worry free: financially, emotionally, and in every aspect of life. My finances would be in order so expenses for travel, luxuries, and gifts for the kids, grandkids, and great-grandkids would be taken care of. My kids would be financially sound, so I would be confident in their prosperity. This would give me the freedom to travel and play and do whatever it is I want to do.”

When Gavin’s not working, he enjoys spending time with friends and family, watching Husky football, and taking weekend trips around the Northwest.

Gavin is registered to transact securities business in the states of WA, OR, CA, AZ, FL, HI, ID, IL, MN, NM, NY and VA.

*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Verity Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.

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