Who would have guessed it? Wall Street’s 2014 investment predictions proved to be wrong.
It is time for 2014 investment predictions. 2014 was an interesting year for the global stock and bond markets. A lot of events took place which fundamentally changed the landscape of global macro-economics and ultimately the performance of markets across the globe.
- Russia invaded Crimea
- The Olympic Winter Games were held in Sochi, Russia
- Germany won the World Cup in Brazil
- ISIS emerges as a problem in Iraq
- The US normalizes relations with Cuba
- Ebola splashed the headlines and the stock market
- The US held Congressional elections and the Republicans captured a majority in both the Senate and the House
- Oil dropped over 45%
- Europe heads into deflation
- The Euro dropped approximately 14%
- 20+ yr US Treasuries outperform equities
Wait a minute… Long-dated US treasuries outperformed equities? How could that be? Wall street unanimously agreed with their 2014 investment predictions that stocks should be over-weighted and bonds under-weighted in 2014. What happened?
This is one of those times where it pays to be a contrarian. Rarely do you see everyone on one side of the boat, but given the low-interest rates at the time, it seemed like a “can’t lose” bet for them. The real problem was that analysts assumed that the low in interest rates was 0%. If you assume that there is no absolute low of zero and that interest rates can be in negative numbers, then the game changes significantly. Then there is no bottom but what is acceptable to the investor/saver.
Right now in Europe, many of the sovereign bonds are showing negative interest rates. See this latest post of our Inflation Monitor for a list of bonds that have negative interest rates. This list may continue to get larger, and even the US may enter the game if this trend continues.
We are in unchartered territory with negative interest rates. Next, comes currency wars, capital controls, outright confiscation of savings, and ultimately devaluation of currencies. The future of this trend does not look pretty. This makes investing in hard assets look like a good idea.
What is in store for the Wall Street 2015 investment predictions?
While I am willing to give some slack to soothsayers in 2014 since some events were generally unpredictable. However they are still fortune tellers… and bad ones at that. What should be obvious from these investment predictions, no one knows the future. If they did, then they would not be publicizing it. They would be sitting on their private island drinking margaritas.
My Prediction for 2015:
Blackrock will not be distributing this chart again for a few years.
Its too bad. I thought this was a great piece of research. Maybe they will consider it in following years after this public shaming of Wall Street institutions has subsided.
Next time you see unanimous Wall Street investment predictions, consider that now might be a good time to be a contrarian.
About Innovative Advisory Group: Innovative Advisory Group, LLC (IAG), an independent Registered Investment Advisory Firm, is bringing innovation to the wealth management industry by combining both traditional and alternative investments. IAG is unique in that they have an extensive understanding of the regulatory and financial considerations involved with self-directed IRAs and other retirement accounts. IAG advises clients on traditional investments, such as stocks, bonds, and mutual funds, as well as advising clients on alternative investments. IAG has a value-oriented approach to investing, which integrates specialized investment experience with extensive resources.
For more information, you can visit www.innovativewealth.com
About the author: Kirk Chisholm is a Wealth Manager and Principal at Innovative Advisory Group. His roles at IAG are co-chair of the Investment Committee and Head of the Traditional Investment Risk Management Group. His background and areas of focus are portfolio management and investment analysis in both the traditional and alternative investment markets. He received a BA degree in Economics from Trinity College in Hartford, CT.