Before every year ends forecasts for the coming year are a tradition in stock market investments. There are talks about the 2014 market crashing as early as Q1 but this was also the case in the first quarter of 2013 as stock market doomsday predictions were overwhelming. But now that 2013 is over and the numbers are in, the past year was not actually so bad at all. There have been great performances from different corporations and the bull market was up 30%. Here is a 2014 stock market forecast based on different indicators in the market:
- Contrary to what everyone is saying, rising interest rates and inflation will not cause the market to go down. This activity will only make the market better including the price of food, the cost of various commodities and even stock prices. Energy prices have been stable towards the end of the year as well as the costs of health care and these are indicators of great times in the market for the first few quarters of the year.
- The Fed is likely to continue its federal funds rate near zero and together with this is their short-term interest rates as well. The recent rates in 10-year Treasury bonds is around 2.8% and the 32-year bonds will drop below 2% and the 30-year bond will fall from 3.9% to 3%.
Wall Street has expected this to persist even up to the third quarter of the year. S&P 500 benefit edges at 9.6% were a record high however incomes climbed just 2.7% from a year prior. In the second from last quarter of 2014, S&P 500 net salary bouncing 14.9% from a year prior on deals development of just 4.7%.
- There are already investors taking money out of their bond funds and investing it on stocks. This behavior is likely to follow through the next year since experts believe that bonds will never be able to catch up with the strength of the bull market.
- From another point of view, the PE on the S&P 500 at 24.5 is 48% above its long run normal of 16.5. The PE midpoints profit in the course of the most recent 10 years to resolve cyclical changes. Additionally, since the PE in the most recent two decades has been constantly above pattern, it likely will be underneath 16.5 for various years to come.
- Housing is a little area however so unstable that it has a huge effect on the economy. At its stature in the second from last quarter of 2005, it represented 6.2% of GDP yet tumbled to 2.5% in the second from last quarter of 2010. That in itself constitutes a retreat, even without the identified decrease in the prices of machines, home decorations and automobiles. Obviously, there are a variety of different variables that are considered limiting impacts. These lead to high down payment prerequisites, stringent assessment levels, livelihood status and work security.
But of course even when the market is up 30% last year, PE and valuations still proves to be fair valued.
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