"Kee" Points with Jim Kee, Ph.D.

Happy New Year with hopes for a prosperous 2015! 2014 certainly treated investors well, at least it did for those who stayed invested. I’ll be giving a full 2015 market outlook in Kee Points next week, but this week I would like to reflect on a few of our firm’s accomplishments over the past year.

 

I don’t like self-congratulatory “How We Did” post-mortems any more than you do I’m sure, but Jeanie Wyatt was way ahead of the curve with respect to the two biggest developments for investors in 2014, and I did want to call some attention to that. The biggest event in the world of fixed income (bonds) was, by far, the sudden departure of Bill Gross from PIMCO in late September. Gross is the most visible fixed-income investor in the world, and PIMCO is one of the largest global fixed income investment managers in the world. Gross’ departure led to the downgrading of PIMCO’s flagship Total Return fund and massive investor outflows. Jeanie approached our fixed income team last February with concerns regarding PIMCO, and our resulting piece, “What’s Wrong With PIMCO?,” was published in March.

 

The biggest event outside of the fixed income market has been the dramatic decline in the price of oil during the second half of the year. Here again Jeanie had been urging being defensively positioned in the energy portion of client portfolios and warning against excess energy exposure. By our Ninth Annual Energy Symposium in May we were positioning for an energy price decline (the unanimous view of our Symposium speakers) even while most analysts were talking about the impact of high oil prices on global economies. As for the overall market we were quite explicit that clients should expect two things in 2014, (1) one or more market pull-backs (-5%+), but (2) ultimately stocks to end higher – possibly average (10%+) or more because of things like increases in M&A (merger and acquisition) activity. That was certainly the case for US markets, with the S&P 500 up 11.4% for the year, while the MSCI World Index advanced 3.61%. And the airline industry was one of the strongest in 2014, boasting the best performing stock, Southwest Airlines. Here’s to more of that in 2015!