Keeping track of global macroeconomic trends is a daunting task. For that reason, investors should review the latest trends each month, but with the year coming to an end, reviewing 2014 as a whole might be more helpful in preparing for the year ahead.
Here are four of this year’s biggest themes:
1) Commodities Got Crushed
All of the hyper-inflationary dreams of commodity bulls have been shot dead. As a group, commodities have fallen around 27% since 2011, and many individual sectors such as oil, as tracked by the United States Oil Fund LP (ETF) (USO), are down more. Over the past year alone, light crude oil is 31% lower.
Even defensive oriented precious metals have gotten clobbered: The ETFS Precious Metals Basket Trust (GLTR), which holds gold, silver, platinum and palladium, is down almost 29% over the past four years.
2) Healthcare Sector Blazed Ahead
The booming healthcare sector has been among this year’s biggest investment themes. The S&P 500 healthcare stocks, as tracked by the Health Care SPDR (ETF) (XLV), are up 30% while biotech stocks, as tracked by the iShares Nadaq Biotechnology Index (ETF) (IBB), have jumped 39% since the start of the year. Both the healthcare and biotech sectors are easily outperforming the broader U.S. stock market, which has gained 16.6% over that same time frame.
3) Long-Term Bonds Outperformed Stocks
The yield on 10-year U.S. Treasuries has shocked Wall Street by sliding 20% this year. Most analysts at the beginning of the year wrongly predicted higher yields and lower bond prices.
In March, we alerted readers that long-term U.S. Treasuries, as tracked by iShares Barclays 20+ Yr Treasury Bond (ETF) (TLT), would be the best way to profit from higher bond prices and lower yields. Since the beginning of the year, TLT — which follows long-term U.S. Treasuries — has jumped by almost 23% while the SPDR S&P 500 ETF Trust (SPY) is up 14%.
4) The “R” in BRIC Got Slaughtered
How bad have Russian stocks been this year? The Market Vector Russia ETF Trust (RSX) has been slammed 35% and the worst may be yet to come. By comparison, the BRIC group, as tracked by the iShares MSCI BRIC Index Fund (ETF) (BKF) — which Russia is part of — along with Brazil, India and China has a modest year-to-date decline of just 0.2%.
Shorting Russian stocks has been one of the best bearish trades of 2014. The Direxion Shares Exchange Traded Fund Trust (RUSS) has soared around 100% year-to-date.
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