Prognostications for the 2014 New Year!

Photo credit: Eva K. / / CC BY-SA
Photo credit: Eva K. / / CC BY-SA

I received an email from an old friend and colleague, Carol Bunevich, a Managing Director with Britton Hill Capital[1], with predictions for the 2014 New Year.  Carol’s perspective is that of a high yield banker, though she’s spent more than a few years around tech and travels to Southeast Asia and Europe frequently.

I love the bullet point style.  Short and to the point:

  • Gains of 2013 were the result of Feds liquidity-generosity.
  • Best S&P returns since 1997.
  • U.S. was the cleanest shirt in a pile of dirty laundry.
  • Not likely to get the same benefits two years in a row.
  • Equities should do well; expect returns may be above long-term averages of high single digits.
  • Bond investors worldwide were stung with their first annual losses since 1999.
  • More declines are expected as the Fed pulls back on stimulus that has supported debt markets for past five years.
  • Debt globally fell 0.3 per cent. US high yield had a 7 percent gain and U.S. treasuries fell 3.2 percent
  • Greek sovereign bonds produced the best returns, at over 50 percent.
  • Expect Fed gently reduces bond buying  ($10 Billion per month).
  • Long-term rates will rise.
  • Short-term rates will be low throughout the year.
  • Banks should be able to make money in this environment.
  • Expect the movement from debt to equity will continue over the first half of the year.
  • First six months of 2014 should see U.S. equities moving higher.
  • The Yellen Fed will be transparent and maintain the Bernanke course of treatment.
  • High yield bonds will present coupon opportunity but that is all.
  • Coupons will gradually move toward long term averages of 9 to 10 percent for B and CCC; floating rate bonds may be a possible place to hide out, but with lower yields of 5 to 6 percent.
  • Tech may remain strong.
  • Social Media (Facebook:  FB, Twitter:  TWTR) in bubble territory.  No earnings eventually hurts. However; being right early is just like being wrong.  [This is where Carol and I part company.  The social media thing is too young, too explosive, with too much potential to be safe betting against.]
  • Apple is now a strong value play; Microsoft the same.
  • Large caps with dividends still feel like a smart place to play.
  • Parts of developed Europe will also show momentum.  Expect Europe to have positive GDP.
  • Japan may disappoint; China may not.  The reverse is also possible. [How’s that for hedging your bets!]
  • Northern Asia will benefit more from the developed world’s growth and will do better than southern Asia. Expect “Asian Spring” in Southeast Asia. More thoughts later.

May all your 2014 surprises be positive: to your health, wealth and happiness in 2014. Happy New Year.

[1] Britton Hill Capital is a division of Further Lane Securities L.P.; Registered Broker Dealer, Member of FINRA, SIPC, NFA and NY State Department of Insurance.

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