Calm has returned to the stock market. After the drubbing (mild drubbing) the market withstood to start the year, the end of last week saw prices spike higher then land smoothly into Monday with a flat Dow and S&P, and a nice gain for the NASDAQ. Thank goodness the bad stuff’s come and gone! Now we can get back to what we’re used to: mostly up days, a few minor setbacks here and there, and another nice increase in the value of our portfolios—just like 2013.
Makes perfect sense. I mean why should we expect anything less? Washington risk is but a fraction of what it’s been the past few years. And even though the Fed is tapering back the bond purchases, somebody—given how rates have remained low—is picking up the difference. And the new Fedhead, Janet Yellen, is, they say, as dovish as they come. And better yet, this earning’s season has seen over 70% of the companies having reported beating expectations. In fact the earnings growth rate (like 7.5%) this go-round is very respectable. And perhaps best of all, the economy just might gain a little traction this year (you read my recent piece on this year’s business investment forecast, right?) Again, why shouldn’t this year be just as calm as last year?
Well, darn it!, I’m thinking maybe this year shouldn’t be as calm as last year—not nearly. I’m thinking maybe the fact that the last time we had a year like 2013—a year with only one pullback reaching the 5% mark—was, you ready?, 1961. That’s right, the last year we saw that kind of volatility is now a half-century old. It can join AARP for crying out loud!
Sorry folks, last year was an anomaly. I give zero odds for a repeat in 2014. Doesn’t mean we won’t see gains this year—I’ve offered up both the fundamental and the technical arguments (along with the usual anything-can-happen caveats)—it just means that during the course of a calendar year, more frequent, and more severe, storms are the norm.
I know, you really liked 2013, we all did, and you want more! Well, my friend, you’re just going to have to be patient. The good news is 2065 will be here before you know it…