bigstock_Business_Success_3954863Look­ing back on 2014, peo­ple are going to say it was a great year to be an investor. They won’t remem­ber how uncer­tain the jour­ney felt right up to the last day of a year that saw the S&P 500 close at a record lev­el on 53 dif­fer­ent days. Think back over a good year in the mar­ket. Was there ever a time when you felt con­fi­dent­ly bull­ish that the mar­kets were tak­ing off and deliv­er­ing dou­ble-dig­it returns?

The Wilshire 5000–the broad­est mea­sure of U.S. stocks and bonds—finished the year up 13.14%, on the basis of a strong 5.88% return in the final three months of the year. The com­pa­ra­ble Rus­sell 3000 index will go into the his­to­ry books gain­ing 12.56% in 2014.

The Wilshire U.S. Large Cap index gained 14.62% in 2014, with 6.06% of that com­ing in the final quar­ter. The Rus­sell 1000 large-cap index gained 13.24%, while the wide­ly-quot­ed S&P 500 index of large com­pa­ny stocks post­ed a gain of 4.39% in the final quar­ter of the year, to fin­ish up 11.39%. The index com­plet­ed its sixth con­sec­u­tive year in pos­i­tive ter­ri­to­ry, although this was the sec­ond-weak­est year­ly gain since the 2008 mar­ket meltdown.

The Wilshire U.S. Mid-Cap index gained a flat 10% in 2014, with a 5.77% return in the final quar­ter of the year. The Rus­sell Mid­cap Index gained 13.22% in 2014.

Small com­pa­ny stocks, as mea­sured by the Wilshire U.S. Small-Cap, gave investors a 7.66% return, all of it (and more) com­ing from a strong 8.57% gain in the final three months of the year. The com­pa­ra­ble Rus­sell 2000 Small-Cap Index was up 4.89% for the year. Mean­while, the tech­nol­o­gy-heavy Nas­daq Com­pos­ite Index gained 14.39% for the year.

While the U.S. econ­o­my and mar­kets were deliv­er­ing dou­ble-dig­it returns, the inter­na­tion­al mar­kets were more sub­dued. The broad-based EAFE index of com­pa­nies in devel­oped economies lost 7.35% in dol­lar terms in 2014, in large part because Euro­pean stocks declined 9.55%. Emerg­ing mar­kets stocks of less devel­oped coun­tries, as rep­re­sent­ed by the EAFE EM index, fared bet­ter, but still lost 4.63% for the year. Out­side the U.S., the coun­tries that saw the largest stock mar­ket ris­es includ­ed Argenti­na (up 57%), Chi­na (up 52%), India (up 29.8%) and Japan (up 7.1%).

Look­ing over the oth­er invest­ment cat­e­gories, real estate invest­ments, as mea­sured by the Wilshire U.S. REIT index, was up a robust 33.95% for the year, with 17.03% gains in the final quar­ter alone. Com­modi­ties, as mea­sured by the S&P GSCI index, proved to be an enor­mous drag on invest­ment port­fo­lios, los­ing 33.06% of their val­ue, large­ly because of steep recent drops in gold and oil prices.

Part of the rea­son that U.S. stocks per­formed so well when investors seemed to be con­stant­ly look­ing over their shoul­ders is inter­est rates—specifically, the fact that inter­est rates remained stub­born­ly low, aid­ed, in no small part, by a Fed­er­al Reserve that seems deter­mined not to let the mar­kets dic­tate bond yields until the econ­o­my is firm­ly and defin­i­tive­ly on its feet. The Bloomberg U.S. Cor­po­rate Bond Index now has an effec­tive yield of 3.13%, giv­ing its investors a wind­fall return of 7.27% for the year due to falling bond rates. 30-year Trea­suries are yield­ing 2.75%, and 10-year Trea­suries cur­rent­ly yield 2.17%. At the low end, 3‑month T‑bills are still yield­ing a minis­cule 0.04%; 6‑month bills are only slight­ly more gen­er­ous, at 0.12%.

Nor­mal­ly when the U.S. invest­ment mar­kets have post­ed six con­sec­u­tive years of gains, five of them in dou­ble-dig­it ter­ri­to­ry, you would expect to see a kind of eupho­ria sweep through the ranks of investors. But for most of 2014, investors in aggre­gate seemed to vac­il­late between cau­tion and fear, hang­ing on every eco­nom­ic and jobs report, pay­ing close atten­tion to the Fed­er­al Reserve Board’s pro­nounce­ments, seem­ing­ly try­ing to find the bad news in the long, steady eco­nom­ic recovery.

One of the most inter­est­ing aspects of 2014—and, indeed, the entire U.S. bull mar­ket peri­od since 2009—is that so many peo­ple think port­fo­lio diver­si­fi­ca­tion was a bad thing for their wealth. When glob­al stocks are down com­pared with the U.S. mar­kets, U.S. investors tend to look at their state­ments and won­der why they’re lag­ging the S&P index that they see on the night­ly news. This year, com­mod­i­ty-relat­ed invest­ments were also down sig­nif­i­cant­ly, pro­duc­ing even more drag dur­ing what was oth­er­wise a good invest­ment year.

But that’s the point of diver­si­fi­ca­tion: when the year began, none of us knew whether the U.S., Europe, both or nei­ther would fin­ish the year in pos­i­tive ter­ri­to­ry. Hold­ing some of each is a pru­dent strat­e­gy, yet the eye inevitably turns to the declin­ing invest­ment which, in hind­sight, pulled the over­all returns down a bit. At the end of next year, we may be look­ing at U.S. stocks with the same gim­let eye and feel­ing grate­ful that we were invest­ed in glob­al stocks as a way to con­tain the dam­age; there’s no way to know in advance.

Is a decline in U.S. stocks like­ly? One can nev­er pre­dict these things in advance, but the usu­al recipe for a ter­ri­ble mar­ket year is a peri­od right before­hand when investors final­ly throw cau­tion to the winds, and those who nev­er joined the bull mar­ket run decide it’s time to crash the par­ty. The mar­kets have a habit of pun­ish­ing over­con­fi­dence, but we don’t seem to be see­ing that quite yet.

What we ARE see­ing is kind of bor­ing: a long, slow eco­nom­ic recov­ery in the U.S., a slow hous­ing recov­ery, healthy but not spec­tac­u­lar job cre­ation in the U.S., stag­na­tion and fears of anoth­er Greek default in Europe, stocks trad­ing at val­ues slight­ly high­er than his­tor­i­cal norms and a Fed pol­i­cy that seems to be wait­ing for cer­tain­ty or a Sign from Above that the recov­ery will sur­vive a return to nor­mal inter­est rates.

On the plus side, we also saw a 46% decline in crude oil prices, sav­ing U.S. dri­vers approx­i­mate­ly $14 bil­lion this year.

The Fed has sig­naled that it plans to take its foot off of inter­est rates some­time in the mid­dle of next year. The ques­tions that nobody can answer are impor­tant ones: Will the recov­ery gain steam and make stocks more valu­able in the year ahead? Will Europe sta­bi­lize and ulti­mate­ly recov­er, rais­ing the val­ue of Euro­pean stocks? Will oil prices remain low, giv­ing a con­tin­u­ing boost to the econ­o­my? Or will, con­trary to long his­to­ry, the mar­kets flop with­out any kind of a euphor­ic top?

We can’t answer any of these ques­tions, of course. What we do know is that since 1958, the U.S. mar­kets, as mea­sured by the S&P 500 index, have been up 53% of all trad­ing days, 58% of all months, 63% of all quar­ters and 72% of the years. Over 10-year rolling time peri­ods, the mar­kets have been up 88% of the time. These fig­ures do not include the val­ue of the div­i­dends that investors were paid for hang­ing onto their stock invest­ments dur­ing each of the time periods.

Yet since 1875, the S&P 500 has nev­er risen for sev­en cal­en­dar years in a row. Could 2015 break that streak? Stay tuned.

Sources:, Bear Mar­kets:

Bar­cap, Aggre­gate cor­po­rate bond rates:

Bloomberg, Aggre­gate cor­po­rate bond rates:

Bloomberg, Trea­sury mar­ket rates:

CNN Mon­ey, Stock Mar­ket Sep­tem­ber Slump:

Mar­ket­watch, One Chart Explains the Unex­pect­ed First Half Trea­sury Ral­ly:

MCSI, Inter­na­tion­al equi­ty indices:

Morn­ingstar, Nas­daq index data:

Reuters, USA Mar­kets 2015 Analy­sis:

Rus­sell, index data:

S&P Dow Jones Indices, Com­modi­ties index data:

Stan­dard & Poors, S&P index data:–p‑us‑l–

Wilshire, index data: