Sir John Templeton coined the phrase, “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” In 2015, we expected investors to transition from “skepticism” to “optimism” as we experienced (1) solid momentum in U.S. economic growth with low inflation, (2) a pickup in consumer spending based on job growth, confidence and a positive wealth effect, (3) solid earnings growth, (4) stimulus from low commodity prices and financing costs and (5) a still-good liquidity environment aided by stimulus from non-U.S. central banks. Our expectations were mostly on track, as reflected in the predictions we made at the beginning of the year:

1. U.S. GDP grows 3% for the first time since 2005.

Growth averaged 2.2% over the first three quarters, slightly less than what we expected. We believe growth could accelerate modestly next year.

2. Core inflation remains contained, but wage growth begins to increase.

Falling energy prices kept inflation levels low this year, but we have been seeing indications that inflation may start to creep higher. The latest reading from November shows average hourly earnings rose 2.3% year-over-year.

3. The Federal Reserve raises interest rates, as short-term rates rise more than long-term rates.

It took until the end of the year, but the Fed finally increased rates in December. The 10-year Treasury yield is close to unchanged for the year, while the yield on the 2-year rose from 0.66% to 0.95%.

4. The European Central Bank institutes a large-scale quantitative easing program.

The ECB launched its its massive easing program in January and expanded its bond purchases at the end of the year. The central bank is continuing to look for ways to promote growth in Europe.

5. The U.S. contributes more to global GDP growth than China for the first time since 2006.