Earlier this year, we declared this chart of US oil production the chart of the year.
Except it probably isn’t.
The following two charts — a yearly chart of WTI crude oil and the US 10-year Treasury yield — are really the charts that define 2014.
Oil plays a significant role in the global economy and is always on the minds of traders and investors, but no one saw the complete rout in oil prices that has defined 2014 coming. And no one could have.
But no matter the root cause, oil prices declined almost 50% over the second half of this year.
Meanwhile, at the start of 2014, the market was — much like at the start of 2015 — getting ready for the Fed’s first rate hike. Consensus was, and still is, that interest rates are going higher, and that this will send Treasury yields higher too.
Some Treasury yields did rise this. Two-year Treasury yields rose to their highest level since 2011 this year. But the 10-year was expected to move from 3% to 3.5% during 2014.
Instead, the 10-year fell from 3% to almost 2%, settling at 2.17% on Wednesday, and Bloomberg reports that the median forecast for 2015 is for yields to rise to 3%.
As is the case every year, there wereplenty of great storiesin the markets this year.
But if someone asks you to give a short — like, actually short — summary of what happened in markets in 2014, just say: “Oil crashed and yields fell.”