Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Shocking Stocks, Bonds and Dollar Market Predictions for 2014… And the Evidence to Prove Them

Stock-Markets / Financial Markets 2014 Jan 20, 2014 - 01:08 PM GMT

By: Money_Morning

Stock-Markets

Robert Hsu writes: Each January, we hear a chorus of pundits making predictions about where the markets will go in the 12 months ahead. The number and volume level of the "predictions" is matched only by the utter lack of evidence to back them up.

These talking heads will be the first to shout "I told you so!" But when they get it wrong, well... the silence is deafening. Their predictions are of little use to us.


But predictions themselves can be very useful. Making a well-reasoned prediction can be a great way to crystallize your thinking on important issues. It's also a good filter that can help you select which trends and sectors to embrace - and which to avoid - over the year ahead.

With this in mind, I have three predictions, all backed by compelling evidence, that will surprise you... and help you make a lot of money this year.

U.S. Stocks Will Continue with Double-Digit Gains

The Prediction: The S&P 500 will finish 2014 at 2,033 - about 10% higher than its closing value on Jan. 15.

The Evidence: The S&P 500 is coming off its best year since the bull market of the 1990s, as the domestic index vaulted nearly 30% in 2013. Given how big that gain was, can stocks really continue to rise in 2014? I mean, how much gas is left in this market's tank?

The answer is plenty. Here's why:

While the Federal Reserve has embarked on a "taper" of its quantitative easing program, I suspect that a Janet Yellen-led Federal Reserve will taper gradually. More importantly, the Fed's zero interest rate policy will remain in place for the entirety of 2014 - and likely well into 2015. The historically low cost of capital will provide sufficient liquidity for this market to keep moving higher, particularly over the next 12 months.

Then there are earnings. I expect they'll be strong in 2014.

We've already seen upbeat bank earnings, and they'll set the tone for all of 2014. You see, as this earning season unfolds, I expect we'll see many more unexpected earnings victories.

Yes, there will likely be some sluggishness on the top line for many companies; however, profit margins for many companies continue to improve as a result of greater efficiency and improved technology. That's a bullish combination, and a tailwind for earnings. That will keep pushing stocks into new high territory.

A Choppy Ride for Treasury Yield

The Prediction: By this time next year, the yield on the 10-Year Note will be 3.08%, a level that acknowledges the reality of economic growth in the U.S., but that also reflects the fact that growth will come at a slow and sluggish pace.

The Evidence: Bond prices slumped significantly in 2013, as the yield on the 10-Year Treasury note spiked to above 3% by the end of the year. The action in the bond pits last year reminded us that interest rates can, and do, move higher. That's something many recent bond market participants had forgotten, and I think it was a good lesson to be reminded of going forward.

As for yields in 2014, I expect there to be a continuation of the recent "choppy" market trading.

So far in 2014, the 10-Year yield has fallen back down to 2.84%, a move that I expected to see after the big run higher at the end of last year. I do, however, think this recent pullback is merely temporary, and I expect yields to rise back above that 3% mark. The path to that 3%-plus benchmark interest rate will, in my view, be choppy, as traders wage a battle for the direction of the cost of money.

The Dollar Will Stay Strong vs. the Euro and Yen

The Prediction: By the end of the year, I predict the dollar-yen exchange rate to rise to 110. The dollar-euro will undergo some normal fluctuations, but by this time next year I suspect it will be unchanged at 1.35.

The Evidence: The value of the greenback versus rival foreign currencies is on the minds of many these days, and for good reason. With the Fed tightening up the reins on its bond-buying program, we should expect that to be dollar-bullish.

I think the Fed's action is just part of the equation in the dollar-bullish thesis for 2014.

On the other side, the euro continues to be weak relative to other global currencies, while the Japanese yen has come under its own bearish pressure.

In the case of Japan, that nation continues the aggressive reflation efforts first instituted by Prime Minister Shinzō Abe. And, as we've seen, those policies are yen-bearish and dollar- bullish.

In Europe the pressure on the euro comes from a lack of any real widespread GDP growth, and that's a condition likely to persist throughout the year.

How about the Chinese yuan? The exchange rate of dollar and yuan is a bit more complicated because it is more political than market driven.

In terms of purchasing parity, the yuan remains overvalued at anything below 7.0, but the trend continues to be bullish for the yuan. I expect to see the dollar-yuan break 6.0 intra-year in 2014, then reverse trend and end the year at 6.1. In other words, right about where it started.

With all this said, we'll come back in 2015 and see how I did. In the meantime, if you have any predictions of your own - shocking or otherwise - I invite you to leave them in the Comment section below.

Source : http://moneymorning.com/2014/01/20/three-shocking-market-predictions-2014-evidence-prove/

Money Morning/The Money Map Report

©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in