Where you, as an investor, fit on the “best of times” to “worst of times” spectrum depends strongly on one factor: are you primarily an equity investor or a fixed income investor?
The trends which had vaguely fomented throughout the year emerged in reinforcing clarity during the 4th quarter. For instance, the taper of quantitative easing shifted from an indistinct future suggestion into an imminent inevitability. The equity markets, riding high through the year despite government intransigence and worries about tightening monetary policy, got a boost from a temporary government shutdown, a 2 year budget agreement and accommodative signals from the Ben Bernanke’s final Fed meeting. Of course, the Federal Reserve only controls the short term floor on rates, so longer term fixed income rates reflected the greater optimism with a final push upwards. In short, several equity markets ended the year at near all-time highs while the bond market suffered its worst year since 1994. I think we can safely say that 2013 closed the markets with a bang, rather than a whimper.