Where will we end 2014 and how?
Every year I make goals for the year. My goals start with a realistic understanding
or expectation of where the market may go the following year. I am not predicting the future. I am not telling you an exact number. I am not trying to get freaky lucky and end
up on television bragging about how I predicted the growth for a year on the
S&P 500. What I am doing is looking
at the information I have today and trying to get an understanding of where the
market might end in 2014. My premises I
will then trade until it is no longer right.
I think the year will end at 2100. I am looking at a round number because it is
easy to guess. I am also giving me a 50 point
plus or minus leeway. CNBC has an
analyst that said 2014 for 2014 and I like that “guess” as well. The S&P 500 ended at 1848.36. That means I am looking for an Increase of
252 points or a 13.6% increase. I would expect
half as good of a year as last year’s return.
I do not think that is unreasonable but let’s look at the reasons why.
Quantitative Easing is still important to the market. The last fed chair said the FOMC Committee
doesn’t look at the growth of the stock market as an indicator to taper. If I do my math, I still see 75 billion a
month in easing even with tapering. I also remember Yellen papers and comments that specifically
state easing is the best way to help foster economic growth with the tools she has.
Along with government, maybe the GOP
can get a budget together and we will not have debt ceilings to pull our market
down. In all honesty, look for other
governments worldwide to also start easing programs. It may not rival ours or Japan’s, but it will
sent a boost to markets and maybe to economies.
I also see economic
data becoming better. It is not that I
trust all the data and not all data is equal.
I do think companies are going to know how to budget for the ridiculous Obamacare
taxes and penalties. I believe companies are slim and trim. They have let people go, created hordes of
cash, and international companies have the benefit of a weaker dollar. They fought to survive a great depression and
it looks like they are heading up from the bottom. Housing is recovering as
well. I hear lots of people telling me everyone
doesn’t have a house yet and they are right.
But, I do see those who can afford a home working to be in one. I am of the belief that owning a home is an
earned privilege not a right.
Not here is the list of things that may have a serious repercussions
to hitting my expected target of 2100.
If our economy isn’t as strong as we think and if the jobs don’t open
up, we will see less consumer spending.
Obviously, our country’s GDP is 70 % consumer spending which means the
consumer confidence in our market must continue to grow throughout the
year. The global economy is becoming
more intertwined. China and Europe must
continue to show improvements. These two
areas of the world are focal points in the news.
The last point I would like to bring up that could be a
negative to my thought process. Where is
all the volume / money at? Bond inflows
are down as are treasury purchases. Junk
bonds are thriving but not making up the loss that we saw in 2008. When is the great rotation going to
happen? Was the money lost and just gone? Are those funds hiding underneath the mattress? I agree that 2008 ruined a generation of
investors. Too many “investors” are too
quick to pull out of the market at the slightest drop of a percentage
point. Most are now to afraid to let the
market act like it is supposed to. Remember,
pullback, corrections, one day drops, and earning drops are all part of the bearish
side of the market. Look to the next
article “What to do for 318 day downside protection”.