2013 in review: US Stocks win the race

Equities reign supreme

As we look back on 2013, investors will smile wide at the US stock market indices hitting historic highs. Not only did US markets have an outstanding year but they doubled the return of international indices. The once popular BRIC investing theme actually finished with 3 of the 4 BRIC countries in the red. The countries that went bankrupt in the financial crisis rose from the ashes as Greece, Ireland and Iceland were all up over 29%. Volatility was crushed by the running bulls as the VIX was down over 30%.

2013

Source: Hays Advisory

Gold crushed, Natural Gas rises

In commodity land, it was a mixed bag. After an epic bull market run since 2000, gold and silver corrected into bear market territory. Runnymede correctly called this in our 4th quarter 2012 strategy as we stated:

Finally, what about gold? After a 12-year meteoric rise, we think gold will rest a bit in 2013 as downside risks fade. In the next recession, gold will likely leap again when central banks fight to devalue their currencies by printing even more Dollars, Euros and Yen. For now, though, we prefer to own equities over gold.

commodities

Bonds see historic outflows

Bonds had a historically bad year both in terms of performance and outflows. With 10-year Treasuries hitting a 2-year high and the Fed finally tapering, bond mutual funds saw over $70 billion in outflows which tops the previous worst year on record of 1994 which saw $63 billion in outflows. With economists forecasting the Fed winding down its monthly purchasing program in 2014, rates will likely rise further in the New Year. When investors open their statements and see the mounting losses in their bond funds, more redemptions will follow. This should be a positive tailwind for stocks as the money will flow into equity mutual funds.bonds

bond outflows

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Who was the fairest of them all?

While the US markets had a stellar year, the biggest winner was Venezuela's Caracas General which increased a mind boggling 481%! With only 15 stocks in their index and not much in terms of fundamentals, market participants can thank the fear of currency devaluation which resulted in parabolic returns. Of course this isn't very pleasant when local Venezuelans are facing over 50% inflation rates. Since there is no Venezuelan ETF, you probably missed out on this one.

The winner in developed markets was Japan. A hat tip to the money printing king Shinzo Abe who printed as fast as the US Federal Reserve and even bought ETFs when buying bonds wasn't enough. While this will likely end horribly, the Japanese celebrated in 2013 to 50%+ returns.

Who do you think will have the best returns in 2014? Happy New Year!

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About the Author: Chris Wang

Chris Wang

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Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Runnymede Capital Management, Inc.), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Runnymede Capital Management, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Runnymede Capital Management, Inc. is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of Runnymede Capital Management, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.