Insightful Investing Newsletter January 2005
4th Quarter 2004 Market Recap
The Stock Market responded well to the prospect of four more years of George W. Bush as a strong 4th Quarter rally helped equities finish the year with double-digit returns. Before the elections the S&P 500 had been puttering along near the break-even level for the year, but the results helped the Large Cap Stocks finish the year with a respectable return of 10.9%.
In a tight race, a continued weaker dollar helped International Stocks return 15.3% to edge out the 15% brought home by Real Estate. Small Cap Stocks were not far behind with a 14.1% return for the quarter.
As expected, the Fed continued to slowly raise short term interest rates during the quarter. The measured pace kept Bonds above water as they returned just 1% for the quarter. That turned out to be about the quarterly average in 2004 as Bonds returned 4.3% for the year. High Yield Bonds, on the other hand, returned that much in the 4th quarter helping them to return almost 10% for the year.
The star performer for 2004 was Real Estate, bringing home almost 32% for the year. In fact, over the last 5 years this has been the place to be invested since Real Estate’s annualized return of over 20% would have helped you more than double your money over that time period.
When it comes to equities, Small Cap Value was the place to be, not only for 2004, but since the Turn of the Century. While Large Cap Growth returned just over 1 percent less than its Large Cap Value counterparts for the quarter, you would now have about 7% less money than you did on the last day that years began with the number 1.
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