At the end of 2013, the stock was at record high with all indicators of optimism amongst investors at levels never before experienced. The enthusiasm was understandable following a year that was stronger than any other was in more than a decade.
The S&P 500 Index was up 29.6% for the year with a very strong fourth quarter gain of nearly 10%. The increase for the full year was the biggest in 26 years and managers of stock funds and mutual funds made the most of such a positive environment, by achieving their best take since 2001.
The average equity fund domestically was up over 8% during the last quarter of 2013 and up more than 30% for the entire year.
Many analysts do not see the environment for investors in bonds being any more benign in 2014. The bond market had a difficult fourth quarter with a sharp rise in the yields last year for the 10-year treasuries from 1.76% to 3.03%. Instruments of lesser quality and with maturities that were shorter fared better.
Treasury issues for much of 2013 were subdue due to the threat and eventually the fact that the U.S. Federal Reserve would taper back on its mortgage securities and Treasury bond purchases. In December, the Fed announced it would lower its purchases by $10 billion per month and has followed through on that in January of 2014. New Fed Chairperson Janet Yellen has announced the Central Bank will continue to pullback on schedule for February.
With quantitative easing investors had reason to purchase stocks during all of 2013 and with the ongoing plan by the Fed for a slow pullback its program and a promise to keep rates on interest low for the long-term, has give investors reason to keep purchasing stocks.
The announcement in December was nerve racking for many, but the market experienced one of its better sessions for the year, the day it occurred.
The S&P 500 was down 3.5% for January but gained back 3.1% of that in just the first two weeks of February. The Dow Jones lost 5.3% the first month, but gained 2.95% back in the first two weeks of February. The tech heavy Nasdaq lost 1.74% the first month and gained 3.33% since.
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