What Investors Can Expect In 2014

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Forbes.com, Fall, 2013. This article was written with Oliver Pursche, the Co-Portfolio Manager of GMG Defense Beta Fund. It was part of a series of articles developed under an agreement with forbes.com to work with a variety of contributors and assist them in delivering actionable investment ideas each week. The site, forbes.com is one of the top 500 sites in the world with nearly 10 million subscribers and nearly 100 million page views a month.

Last year I made 10 predictions for 2013. Some were bolder than others. As always, I promised to review these at the end of the year and give myself a score card. The first five predictions made on December 11, 2012 were:

1. U.S. GDP growth would remain tepid in the first half of the year, before picking up to a near 3% rate during the second half.

2. Stocks will be very volatile in January and through the first quarter, but thereafter should regain their upward momentum to allow the S&P to gain about 6% in 2013.

3. Average gasoline prices in the U.S. will rise above $4.50 by Memorial Day.

4. Europe will remain in recession for most of the year, ultimately forcing a Greek exit from the currency zone.

5. Housing drops again, after banks release a large chunk of their foreclosure inventory onto the market. This should be temporary.

By my count I’m 3.5 for 5.

In fact, I was modest in my first two predictions: U.S. GDP growth grew 3.5% in the third quarter and the S&P has gained 26.40%, year-to-date.

Gasoline did not rise as I expected and national average for gas prices Memorial Day 2013 were about the same as the 12 months prior, $3.66/gallon (although they did spike to all-time highs in the Midwest and California due to refinery outages). The current U.S. average is $3.28/gal.

Europe did remain in recession for most of the year, although after much speculation Greece didn’t exit (the so-called “Grexit.”)

The median home price did plunge mid-year before rising again by 12.8% in October from a year ago.

My first five predictions for 2014 are:

1. The Fed will continue Quantitative Easing (QE) at an annual pace of $750 billion through the year.

2. Consumer Price Inflation (CPI) will remain below 2%.

3. The unemployment rate will drop to 6.5% by year-end.

4. The S&P 500 will gain more than 10% for the year. [My target for the S&P is 2,000, which would be a gain of 10.95% from today’s 1,802.62.]

5. European equities will outperform the S&P 500 (in local currency)

Stay tuned for my next five predictions; as I said last year, these are my predictions and do not represent what I think should happen or what I want to see happen, rather a reflection of my expectations.