It was another good year for investors. Some thought too good. The New York Times coined the term the “Everything Bubble.” Hedge funder Paul Singer said the market was so good it had to be faked. Noble prize-winning economist Robert Shiller called stocks “very expensive.” And yet all those warnings didn’t talk investors out of the market. Equities wobbled in the late summer and early fall. But the market regained its footing quickly, leaving Singer, Shiller, and others to worry about the possibility of a bust for another year.
Southwest Airlines – up 115%
Airlines have long been a confounding investment. A necessity and yet often a money loser. Yet in 2014, a better economy and a drop in oil prices provided lift off for airline company stocks. Shares of Southwest Airlines (LUV) rose nearly 115%, making the company’s stock the best performing in the S&P 500.
Allergan – up 93%
No really meant no. In April, pharmaceutical company Valeant offered to buy botox maker Allergan for $156 a share. Allergan’s stock was at $116. Nonetheless, Allergan (AGN) said no. That didn’t stop Valeant. It upped its bid a number of times to win over Allergan. It didn’t work. But Valeant was successful in driving Allergan’s shares higher. In the end, Allergan went with a different suitor, another pharmaceutical company, Activis, which offered $219 a share, making Allergan one of the best-performing stocks of 2014.
Coffee beans – up 57%
A severe drought in Brazil, which produces about half of the world’s most widely consumed variety of coffee bean—arabica—drove up the price of coffee in 2014. Starbucks and others then raised prices for mochaccinos and other varieties of joe. Supermarket brands like Maxwell House raised their prices as well. Later in the year, when rain returned to Brazil and coffee prices started to fall, some producers who had gotten used to higher prices, held back their crop, hoping to sell later. It was enough to give the average coffee drinker the jitters.
The Somali Shilling – up 52%
The world’s strongest currency in 2014 belongs to a small, war-torn African nation, best known for its modern-day pirates. Even more peculiar, Somalia doesn’t have currency reserves, and its central bank, which doesn’t seem to have any consistent monetary policy, is only three years old. But after years of civil war, Somalia is starting to improve. The nation is safer, prompting residents who fled to return, with their currency. Other nations have pledged billions to help Somalia rebuild. The result: the Somali Shilling rose 52% this year versus the dollar, making it the strongest currency out of the 175 that Bloomberg tracks.
U.K. bonds – up 13%
In absolute terms, British government bonds weren’t the best performer of 2014. But investors in U.K. sovereign bonds had little risk of losing their money. So on a risk/reward basis, British bonds were probably the best investment of the year. A weakening U.K. economy sent many investors to seek the safety of bonds. It also caused a lot of people to stop betting on higher interest rates in the U.K. Both of those factors drove up prices. And more stimulus from the European Central Bank—which is helping U.K. bonds even though Britain is outside the European Union—should keep rates low and bond prices high across Europe for a while.