I have several routines that I rummage through as we get the New Year kicked off. Namely, the first and most major question I have to ask is this one: Will this be a good year for stocks?
Now, if I told you my opinion it may/may not come true, but this is not meant to be a prediction. I have to be comfortable with where Mr. Market is at the moment, always realizing things can change on a dime. Even after a great 2013 the market is still looking fine to trade. Using calendar markers as milestones (like annual, quarterly, monthly) is a great way to get started.
So, how do I answer the question above, ‘will it be a good year for stocks?’ Simply put, we have to start with the Fed. The first big test is if they are accommodating, and that is an absolute yes.
Don’t believe me? Just read last week’s statement and listen to the press conference. We need to pivot off the Fed because in a liquidity and sentiment-driven market they are they suppliers of fuel. Regardless of your viewpoint of policy we must not hate ‘the player nor the game’. Could they change their minds and move to a more hawkish view? Absolutely, and we will be on guard for that.
There are certainly times when the market is not a favorable playing field, and we’ll play it accordingly. But this is not often the case nor is it now, and as long as the Fed wants us in risk assets (size is not the point here) then that is where we will be.
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Bob Lang has been managing private options trading accounts for clients since 2004 and providing subscribers with guidance on trading options for income at Explosive Options since 2011.
