5 lessons this year's market holds for 2014
With 2013 coming to an end, it may be a good idea to heed these tells as you prepare your playbook for next year.
The stock market rebound that began in March 2009 has proven to be remarkably durable.
While many thought the bull needed a breather after rising at a double-digit clip in 2012, it has actually grown stronger: Even with a series of boulders thrown in its path, the S&P 500 Index has tacked on 20% gains thus far in 2013, which is surely higher than even the most bullish forecasts had anticipated when the year began.
For people like Warren Buffett, a steadily expanding bull market can lead investors to the wrong conclusion: "Once you reach the point where everybody has made money no matter what system he or she followed, a crowd is attracted into the game that is responding not to interest rates and profits but simply to the fact that it seems a mistake to be out of stocks." He said that back in 1999.
I'll disagree that the real risks for 2014 are the ones we can't see. The ones we can see are potentially devastating. Remember the debt ceiling and budget battle? That smacks us in the face early in the year. Then we've got to deal with Yellen and a more hawkish Fed and tapering will be on the mind of everyone. The fallout from Obamacare is still in its infancy - there will be plenty more "unintended" and negative consequences next year. And don't forget, 2014 is an election year.
But there is some potential good news, at least for investors, at least temporarily. Ultimately, we could see the election used as an excuse to push all of these issues to the back burner and into 2015. It might sound far fetched to think of QE as extending into Q4 of next year, but just look at where we've been, it's really not that improbable at all. Politicians are infamous for kicking the can down the road, especially in an election year as most of them are cowards and afraid of alienating any segment of their constituency. The same also applies to Obamacare - it will inevitably be delayed as the politicians turn their attention to winning an election.
"disagree that the real risks for 2014 are the ones we can't see. The ones we can see are potentially devastating. Remember the debt ceiling and budget battle? "
That's been said for the past 50 years. What else is new ?
1)$500-700Trillion in Global Scam Derivatives
2)Rising Interest Rates
3)Soaring Global Government DEBT
4)Soaring Corporate Debt(used for Stock Buybacks)
6)The China Black Hole
7)Record Stock Margin Debt
These just to name a few. To taper or not and it's effects, mostly guesswork as there are no time machines to prove whether or not the Markets would have reacted as many have suggested if Taper was severely cut. People always assign blame to why Markets go down but rarely is there Real Proof that was the sole reason or the Real Reason. The Feds actions are the convenient excuse for latest ups or downs in the Markets. Remove that as a factor an folks will find another convenient excuse for why we have ups and downs in the Markets. That has been the case for Decades.
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Stocks drift lower and bonds are hit as investors await the Fed. Prepare for higher volatility this week.
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