Markets In 2015: It Could’ve Been Worse

We take a look at which segments of the market outperformed and underperformed.

Senior ETF Analyst
Reviewed by: Sumit Roy
Edited by: Sumit Roy

Today marks the close of a tumultuous year in financial markets. After bouncing around violently during the late summer, two of the three major stock indexes ended modestly lower, while the Nasdaq powered to more than a 5% gain.

The S&P 500, the most prominent U.S. index, dipped below last year's closing level of 2,058.90 today. The final print of 2,043.94 for 2015 gives it a 0.73% loss for the year, making it the worst annual performance for the stock market since 2008, when the index tanked 38.5% amid the financial crisis.

Given the troubles facing the market over the year, perhaps investors can take solace in the fact that stocks didn't perform even worse. From the slowdown in emerging markets to the plunge in oil and other commodities, to the first Fed rate hike in nearly 10 years, there was plenty for investors to worry about.

Oil Drops, Dollar Rises, Profits Shrink

In particular, the sharp decline in oil prices to their lowest levels since 2009 had a profound impact on earnings for U.S. corporations. Energy sector profits plummeted by about 59% in 2015, dragging overall S&P 500 earnings down with them.

The final numbers aren't in yet, but in aggregate, companies in the S&P 500 are expected to have seen a 0.7% year-over-year decline in earnings in 2015, according to FactSet. That's the first negative year for profits since the financial crisis.

Of course, bulls will argue that if you strip out energy, the numbers would be much stronger. That's true.

It's also true that without the drag from the surging U.S. dollar, profits would have been higher still.

The U.S. Dollar Index climbed 9% in 2015, which weighed on earnings for multinational corporations.

Small-Caps Underperform

Of course, when it comes to stocks, U.S. large-caps aren't the only game in town. The S&P 500 fared relatively well thanks to the outstanding performance of several prominent stocks such as Google, Amazon, Microsoft and Facebook.

On a total return basis (including dividends), the SPDR S&P 500 ETF (SPY | A-98) returned 1.3%. But smaller stocks didn't do as well.

The small-cap iShares Russell 2000 (IWM | A-92) lost 4.5% this year, while the SPDR S&P MidCap 400 ETF (MDY | A-83) shed 2.5%.

In an environment of higher interest rates and economic slowdown concerns, investors clearly favored large-caps over small-caps.

Outside the US

Outside the U.S., it was a mixed bag, and currency exposure was key. For U.S. investors, the rising dollar ate into returns from holding international stocks, but fortunately, investors had the opportunity to hedge their currency exposure if they wanted.

Stocks in Europe performed well thanks to the European Central Bank's unprecedented quantitative easing program. The iShares Currency Hedged MSCI EMU ETF (HEZU | D-42) returned 7.6%.

Likewise, the Bank of Japan's ongoing QE program helped lift the iShares Currency Hedged MSCI Japan ETF (HEWJ | D-41) to a 9.3% gain.

On the other hand, emerging markets struggled immensely amid a host of concerns related to China's slowdown, geopolitics and crumbling currencies. The Vanguard FTSE Emerging Markets ETF (VWO | C-86) lost 15.8%, while the iShares Currency Hedged MSCI Emerging Markets ETF (HEEM | F-52) shed 10%.

Within emerging markets, performance was largely negative, but with a big range. The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR | F-54) slipped 2.4%, while the iShares MSCI Brazil Small-Cap ETF (EWZS | B-97) tanked 41.7%.

Junk Bonds Hammered

In fixed income markets, the Fed's first rate hike in a decade only had a modest impact on Treasurys. The U.S. 10-year bond yield climbed from 2.17% at the start of the year to 2.27% at the end.

The two-year yield rose from 0.66% to 1.05% and the 30-year yield rose from 2.75% to 3.02%.

The iShares Core U.S. Treasury Bond ETF (GOVT | A-97) ultimately didn't do much, ending with a 0.9% return for the year.

At the same time, high-quality corporate bonds fared only slightly worse. The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD | A-77) fell 1.3%.

The bigger action was in the corporate high-yield bond market. The threat of higher defaults due to the downturn in the oil and gas industry plagued the energy-heavy junk bond market all year long. At 700 basis points, high-yield spreads are at their steepest level since the eurozone sovereign debt crisis in 2011.

Prices for the largest junk bond ETF, the iShares iBoxx $ High Yield Corporate Bond ETF (HYG | B-68), sank to their lowest levels since the financial crisis. Even including hefty interest payments, investors in the fund lost 5%.

Sampling Of 2015 Market Returns

CategoryIndex Or ETFReturn
U.S. DollarU.S. Dollar Index9.3%
JapaniShares Currency Hedged MSCI Japan ETF (HEWJ)8.9%
EuropeiShares Currency Hedged MSCI EMU ETF (HEZU)7.6%
U.S. Large CapsSPDR S&P 500 ETF (SPY)1.3%
U.S. TreasurysiShares Core U.S. Treasury Bond ETF (GOVT)0.9%
Investment Grade BondsiShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)-1.3%
ChinaDeutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR)-2.4%
U.S. Mid CapsSPDR S&P MidCap 400 ETF (MDY)-2.5%
U.S. Small CapsiShares Russell 2000 ETF (IWM)-4.5%
Junk BondsiShares iBoxx $ High Yield Corporate Bond ETF (HYG)-5.0%
Emerging MarketsiShares Currency Hedged MSCI Emerging Markets ETF (HEEM)-10.0%
GoldSPDR Gold Trust (GLD)-10.7%
Emerging MarketsVanguard FTSE Emerging Markets ETF (VWO)-15.8%
CommoditiesS&P GSCI Spot Commodities Index-26.1%
Crude OilWest Texas Intermediate Crude Oil Futures-30.5%

Contact Sumit Roy at [email protected].

Sumit Roy is the senior ETF analyst for, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for, with a particular focus on stock and bond exchange-traded funds.

He is the host of’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays,’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.