• Home
  • About
  • Services
  • Contact
  • Media

2013 Review: Significant Events

Posted January 2, 2014 by Denis Smirnov

Imagine for a minute that you have spent all of 2013 on a deserted island with no access to news.  Upon your return you were told that you have missed:

  • Washington antics – sequestration, ugly fight over the debt ceiling / budget, 2-week government shutdown and filibuster “Nuclear Option”
  • Federal Reserve – “QE Taper” and a new chairman (Janet Yellen) nomination
  • Global unrest – Boston marathon bombing and escalating tensions in the Middle East (Syria, Egypt, etc.).

What would be your guess of what the market return for the year was?  I bet it wouldn’t be +32.4% !  Yet that is what the S&P 500 returned as it climbed the proverbial “Wall of Worry” throughout the year.

Exhibit 1 shows the weekly % changes in the S&P (green and red bars) and the level of the index (black line).  The annotations are the major stories of the year that affected the markets.  It’s not meant to be a comprehensive list, just my personal observations.

Exhibit 1 – 2013 S&P 500 Timeline

6-1

Source: PlanByNumbers, Yahoo! Finance

Throughout the winter and early spring, the lawmakers could not agree on a budget compromise, leading to the dreaded “sequester” – a series of budget cuts designed to be so severe and indiscriminate that passing of a fix was all but guaranteed.
In March, the Cyprus bank deposit haircut was the big story as investors feared it would lead to massive capital flight from the Eurozone.  Ultimately, the central bank agreed to a 47.5% haircut for international deposits over 100,000 euros.  Despite the public outcry, that crisis remained largely contained to Cyprus.

April brought the Boston Marathon bombing and the ensuing manhunt.  After a few quiet weeks, the Fed decided to throw a monkey wrench and announce impending “Taper”.  From the day before its first mention on May 22 to the short-term bottom in late June, the market dropped nearly 6%.  Despite an improving economic picture, the market was driven by Taper and the perverse situation when good news meant withdrawal of the stimulus and led to market sell-offs.  This prompted the Fed to go on the PR offensive to talk investors off the ledge.  While stocks recovered from the initial Taper blow, bonds didn’t fare as well.  10 year Treasury yield jumped from 1.93% on May 21 to briefly hitting 3% level in early September.  Throughout the summer, the market convinced itself that the Fed would begin tapering at its September meeting, so then they surprised everyone and decided to push it back (the market went up 1.22% on the news).  Finally, after the December meeting, they unexpectedly announced QE Taper of $10 billion a month starting in January.  Interestingly, the market went UP 1.66%, good for the 3rd best day of the year.

Another bit of excitement was “Nasdaq Flash Freeze” in late August, which was reminiscent of the market “Flash Crash” back in 2010.  “Obamacare” enrollment started on October 1 with the ensuing website disaster.  TWTR went public on Nov 7 at $26.  It jumped 72.7% on the first day of trading and then proceeded to rise an additional 42% to close the year at $63.65.  This was a much more successful IPO than its social media peer Facebook.

October brought with it an ugly battle over the budget and debt ceiling.  The lawmakers could not come to an agreement, bringing about a two-week government shutdown.  To everyone’s surprise, they finally managed to agree on a two year budget deal in mid-December, well before the deadline.  After the budget deal and Taper announcement, the market pretty much cruised the last 3 weeks into the record books (2013 turned out to be one of the better years in modern history – Exhibit 2).

Exhibit 2 –S&P 500 Annual Returns Since 1926

6-2-1

Source: PlanByNumbers, Ibbotson SBBI, Standard & Poor’s

The year was strong throughout with only two negative months (Exhibit 3). January, July and October were the strongest months (interestingly those were all during earnings seasons).

Exhibit 3 –S&P 500 Monthly and Quarterly Performance in 2013

6-2

Source: PlanByNumbers, Yahoo! Finance

In the next post, I will take a closer look at sector and asset class performance in 2013.

Share this:

  • Facebook
  • LinkedIn
  • Twitter
  • Pocket
  • Email

Sign up to the newsletter

Categories

  • Bear Markets
  • Bonds
  • Economy
  • Education
  • Financial Planning
  • Indexing
  • Investing
  • IPO
  • Retirement
  • Taxes
  • Uncategorized
  • Valuation

Archives

  • January 2023
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • May 2022
  • April 2022
  • February 2022
  • January 2022
  • October 2021
  • September 2021
  • July 2021
  • February 2021
  • January 2021
  • November 2020
  • October 2020
  • September 2020
  • July 2020
  • June 2020
  • May 2020
  • March 2020
  • February 2020
  • January 2020
  • November 2019
  • October 2019
  • September 2019
  • July 2019
  • May 2019
  • February 2019
  • January 2019
  • December 2018
  • October 2018
  • September 2018
  • July 2018
  • June 2018
  • May 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • October 2013
About
  • Background
  • Who We Are
  • The Gordian Knot
Services
  • Services
  • Planning Process
  • Investment Philosophy
Contact
  • Contact Details
  • Inquiry Form
  • Map
Media
  • Articles
  • Blog
  • Reviews
Dave
Denis
 
 
 
 

Gordian Advisors Financial Planner

Office: 2200 E. River Rd., Suite 109, Tucson, AZ 85718

Phone: 520-615-2779

Email: info@gordianadvisors.com

Download Form Form CRS Client Relationship Summary

Download Form ADV Disclosure Brochure

Gordian Advisors may only transact business or render personalized investment advice in those states where we are registered, or have filed notice, or are otherwise excluded or exempted from registration requirements. Material discussed is meant for general illustration and/or informational purposes only, and is not to be construed as investment advice. Nothing on this web-site should be interpreted to state or imply that past results are an indication of future performance. Although this information has been gathered from sources believed to be reliable, please note that individual situations may vary. Therefore, any information should be relied upon only when coordinated with individual professional advice.