There are still a few more weeks left in 2015, but we can already summarize the main themes of a year that many will be happy to put in the history books. So, without furhter ado, here are the 10 bullet points that capture what 2015 meant to financial professionals everywhere, and why it was such a painful year to most.
- 2015 ends with the market cap of Amazon & Google exceeding that of every single Chinese company in the MSCI China index…
- …the US stock market a mere 107 trading days away from becoming the 2nd longest bull market of all-time, with equity leadership driven by “growth” (longest duration of outperformance ever) & “quality” (at all-time relative high)…
- …and $6trn of negatively-yielding government bonds, $17trn of bonds yielding <1%, and the Fed expected to raise the Fed funds rates for the 1st time since 2006.
- 2015 annualized returns (thus far): dollar 11.9%, cash flat, stocks -0.2%, bonds -3.7%, commodities -25.6%... cash has
outperformed stocks & bonds for the first time since 1990… - …because global GDP & EPS in 2015 were consistently revised lower thanks to weak trends in commodities, China, credit, plus a surprisingly lackluster US consumer...
- …and yet stocks outperformed bonds, highlighting how tough it is to generate fixed income returns after 6 years of ‘financial
repression”. - 2015 was marred by “pain trades” & flash crashes (e.g. Swiss franc, German bunds, China stocks, high yield bonds, health care…) as era of “excess liquidity” mutated into fear of “Quantitative Failure” & market illiquidity.
- BofAML’s asset allocation of long dollar, long volatility, long real estate, long stocks over bonds & commodities, DM>EM performed well...but “Great Rotation” trades e.g. long banks, short bonds, disappointed, as Main Street lagged Wall Street.
- 2015 winners: Russia (stocks 22%, bonds 21%), US dollar (10%), Japanese stocks (10%), biotech (7%), consumer discretionary (7%), EM corporate bonds (4%).
- 2015 losers: Brazil (stocks -33%, BRL -29%), copper (-27%), oil (-23%), oil stocks (-16%), the 30-year US Treasury (-4%).
In short, 2015 was a year of disappointing growth, historically low rates, deflation, inequality, volatility & lackluster returns, outside of the year’s perfect pair trade of long US dollar, short commodities.
Source: BofA
