U.S. equities started the year declining -3.00%. In a Groundhog Day scenario, January 2015 was very similar to January 2014 as investors worried that this would be the year that the Federal Reserve finally raises rates. For the first time in 10 months, the MSCI EAFE (+0.49%) outperformed the S&P 500 (-3.00%). Maybe this will be the year when diversification and active management pay off.

The flight to liquidity and quality in the global markets continued at a feverish pace and U.S. Treasuries exploded higher in January. The 10-year U.S. Treasury was up +4.61% for the month, sending the yield down to +1.68%. Even with yields at these levels, U.S. Treasuries could be considered to be like high yield bonds compared to developed European and Japanese government bonds.

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