Best Performing US Equity Funds

Following a very strong 2013, many forecasters at the start of 2014 predicted that the US would underperform both Europe and Japan on valuation grounds, but this didn't happen

Lena Tsymbaluk 24 March, 2015 | 4:56PM
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The US was again the standout market in terms of performance in 2014, registering a third straight year of double-digit gains. The S&P 500 index finished the year up 13% in US Dollar terms, materially outperforming other global markets, including Europe, Japan and emerging markets. Following a very strong 2013, many forecasters at the start of 2014 predicted that the US would underperform both Europe and Japan on valuation grounds, but this did not happen.

On a sector basis, the top-performing sectors in 2014 were utilities and healthcare, with the S&P 500 Utilities and S&P 500 Healthcare indices returning 29% and 25.3%, respectively. Most analysts attribute the unusually strong performance of utilities at this stage of the business cycle to investors’ search for yield in an environment of ultra-low interest rates. As of mid-December, utilities’ average dividend yield was 3.7% compared with 2.1% for the 10-year US Treasury bond. As a result of their high dividends and consistent economic performance, utility stocks have become a popular alternative to fixed-income investments.

On the flip side, falls in commodity prices led to poor performance for the energy and materials sectors. Energy was the worst-performing sector of the year, with the S&P 500 Energy index declining almost 8% in 2014. The dramatic 40% collapse in the oil price during the second half of the year, driven by a supply/demand imbalance, had a significant impact on energy stock valuations, driving the whole sector down. The materials sector was also weak over the past year due to concerns over slowing economic growth in China and falling commodity prices. It is hard to overstate the importance of China to global commodities as it accounts for about half of global steel demand and two thirds of the iron ore market.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Dodge & Cox Worldwide US Stock A GBP42.87 GBP-0.92Rating
Fidelity American A Acc GBP5,843.01 GBP-0.14Rating
T. Rowe Price US Lg Cap Gr Eq A USD75.40 USD0.31Rating

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Lena Tsymbaluk  

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