We are into the final week of 2013, so don’t expect much from the market. Everyone is in San Francisco, specifically at Pier 39. Well, maybe not everyone, and maybe not today, but on this past Saturday, it sure seemed everyone was there.
- While the market will likely enter January quietly, with many traders still out for the holidays and few major catalysts, the upward trend is seen continuing next week, especially in some of 2013’s high-flying names.
I have been to San Francisco about a dozen times in my adult life, and I can honestly say I have never seen as many people as I saw when I was there on Saturday. I guess the world’s shoppers are not in a shell, as the folks at Pier 39 were shopping big time. The stores and restaurants were jam-packed and I mean crammed full. Walking through the mall meant bumping and dodging folks who were bumping and dodging themselves.
- As Wall Street’s best year in more than 15 draws to a close, few are expecting a repeat performance in 2014, though traders have plenty of reasons to feel optimistic.
On the one hand, I felt somewhat uncomfortable; on the other, seeing all those folks shopping and eating made me believe even more in the coming year – 2014 might have its ups and downs, and we will likely see a decent rebalancing later in the winter or early in the spring, but as good news of the global economy continues to flow out, we will see many opportunities for making money.
- Economic growth is expected to accelerate next year, boosting employment and consumer purchasing power.
- There’s a pervasive feeling that the economy is getting better, and the Fed is still on the market’s side after saying it would keep rates low.
Yet, even with the building feeling that the world economy is finally coming together after five years of fits and starts, there is reason to believe that 2013 is one for the record books and that 2014, although it will be good, it won’t be as good.
- But with markets repeatedly notching all-time highs that may not translate to market gains as dramatically as in 2013.
- However, while new money will still be flowing into stocks next year, probably we’ll see less money come in. There’s little chance of another 30 percent gain or so next year.
Nevertheless it promises to be good, looking at the current set of fundamentals. Another “however,” and a “but” to boot is in order though.
- At almost five years, this bull market is right up there with the three longest bull markets in history. Sentiment and complacency have reached levels typical of a bull market top.
“However,” because the market rode so high in 2013, it is likely that at some point not too distant, more than a few big players will feel a topping and start to take profit. This will lead to a multitude of others feeling the trend is ending, so they too will take money and so on. “But” the smart money will lay in wait until the fear passes and then the market will return to its upward trend.
What to look for in 2014? Perhaps more of the same with a little financials thrown in is what I say.
- Consumer discretionary and tech names have driven the market over the past 12 months.
Think Europe also, and the emerging markets might have a good year as well. My point is you need to spread out a bit but do so in a targeted manner.
- Another takeaway from 2013 is that “setting it and forgetting it” in terms of the asset allocation in your portfolio is a thing of the past. Yes, I understand that some very smart guys have won Nobel Prizes for their work on diversification. However, there is little substitute in this game for being in the right place at the right time.
Keep on relaxing this week. You need the rest. The year coming up will require work, much work, but it will pay off, if you do it.
Trade in the day; Invest in your life …
