Surprise No. 4: Bonds outperform stocks.
Bonds outperform stocks in 2014.
Against the backdrop of a decline of between 5% and 15% in the U.S. stock market, the return on long-dated, taxable U.S. bonds is close to +10%.
Interest rates decline from 2013's year-end levels. The yield on the 10-year U.S. note ends the year between 2.5% and 3.0%.
Closed-end municipal bond funds are among the best asset classes during the year, achieving a total return of about 15% in 2014.
Strategy: Buy iShares 20+ Year Treasury Bond ETF (TLT), PowerShares Build America Bond Portfolio (BAB), BlackRock Municipal Target Term Trust (BTT), Eaton Vance Municipal Income Term Trust (ETX), BlackRock Investment Quality Municipal Trust (BKN), Nuveen Select Quality Municipal Fund (NQS), Nuveen Premium Income Municipal Fund II (NPM), Nuveen Dividend Advantage Municipal Fund (NAD), Nuveen Municipal Market Opportunity Fund (NMO), Nuveen Municipal Advantage Fund (NMA), Invesco Pennsylvania Value Municipal Income Trust (VPV), Invesco California Value Municipal Income Trust (VCV), Nuveen Quality Income Municipal Fund (NQU), Nuveen Premium Income Municipal Fund (NPI) and Nuveen New York AMT-Free Municipal Income Fund (NRK).