Dear investors,
In general 2014 was quite a difficult year for investors. Apart of the US market, all global markets finished the year with negative performances.
SPY 13.46% (S&P 500 US market)
FEZ -9.75% (Euro Stoxx 50)
EEM -3.89% (MSCI Emerging Markets)
EPP -1.92% (MSCI Pacific ex-Japan)
ILF -12,29% (S&P Latin America)
AGG 5.99% (Core Total US Bond (5-6yr))
However, most of the negative performance of these foreign market ETFs is due to the strong US$. The Euro lost 12% on the US$ and the US$ index UUP is 10% higher.
In fact, the USD/EUR hedged DBEU (MSCI Europe) ETF had a +4% performance, which is nearly 15% better than the USD denominated FEZ.
It is very difficult to forecast the influence of exchange rates on our strategies. All this is driven by the Yellen and Draghi, but longer term, a strong US$ will make European and Asian markets more competitive. So, we will probably see a rotation away from the US market to some foreign markets at some point.
In spite of the global weakness and currency dislocations, the rotation strategies came through flat to up nicely for the year, and all had a strong year with hedging. We had 5 intermediate short market corrections, which typically had a 2 week pullback of up to 10% and then a very fast recovery.
This sort of whipsaw market is not ideal for our rotation strategies. At least for the old style of rotation strategies which always switched 100% between stock market ETFs and treasuries.
Continue reading about our investment portfolio performance at Logical Invest.