Russia, Oil and Greece: New and Old Bogeymen for the Financial Markets

A man stands next to a building under a board showing currency exchange rates in Moscow, Dec. 16, 2014. Russian banks are struggling in the face of a recession. Reuters
Source: http://www.ibtimes.com

I will do a relative short post this month as I will be focusing my efforts to work on the annual investment review and outlook report.

December witnessed the rise of a new global financial threat and the resurrection of  another old nemesis.

The continued fall of Oil prices below $60 saw huge amount of funds being pulled out of countries that are reliant on oil exports. The Russian economy is especially hard hit as the Russian central bank spent a third of their reserves trying to prevent the slide of the Rubles. The fear reached the peak when rumors of a potential implementation of capital control by the Russian government sent investors money fleeing Russia, and Europe.

A decision by the Greece parliament to call a snap presidential election and their failure to re-elect the Greece President reignited the Greece crisis as the country goes to polls again. With the popularity of the anti-Euro opposition party, the fear of Greece being forced to leave Euro zone became a new flare point for the already fragile Euro economy.

The global stock market went into an extreme fear mode with global stock markets correcting from anywhere between 5-10%.

The US Central Bank swops in and saved the day again, as SuperFed declared that they will be "patient" when it comes to raising interest rates in 2015. The market rallied strongly and stabilized going into the holiday seasons. With all the bankers and traders on holiday, the global stock market also settled into a sideways holiday mood.

2014 will be remembered as the year of when SuperFed saved the world. If anybody deserves a peace keeping medal to prevent the world from descending into a financial chaos, the US Central Bank and Janet Yellen should be honored with that award for year 2014. 

Meanwhile, the portfolio ended with a positive return as US small capitalization stocks surged, thanks to the improving economic fundamentals in US. The portfolio benefited much from that surge with our allocation into small-mid cap stock and managed to outperform the world index for the month.

The Cash portfolio ended the year with a 3.49% return with an annualized return of 8.8% for past 3 years.

The CPF portfolio ended the year with a 5.75% return.

Look out for the investment review for 2014 and outlook for 2015. If you are wondering how accurate my predictions for 2014 has been, you can check out 2014 annual report.