Financial publications are ripe with their respective market outlooks for 2014. Not that they did all that well with this past year. Most underestimated the meteoric 26 percent market surge and some individual stock picks fell flat on their face. Not that I didn’t have some losers this year too, but on balance better than a savings (0.01%) account. In summary, however – and for what it’s worth, the pundits are predicting an improved economy, Fed tapering in the first quarter (no surprise, there) and a modestly higher, but bumpy stock market for the next twelve months. Most analysts are looking at industrials, technology, consumer-discretionary and healthcare to outperform and are shedding utilities, telecoms and consumer staples. Bottom line, have a well diversified portfolio for long-term results in a mix of various sectors with an emphasis on conservative, income or more speculative holdings depending on your goals, income needs and tolerance for risk. And watch my allocation models for tweaking from time-to-time. In the words of Warren Buffet: “We’ve long felt that the only value of stock forecasters is to make fortune-tellers look good . . [My partner] Charlie [Munger] and I believe that short-term market forecasters are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children”.
This past week the market focused on quantitative easing fears. Enough already! Much of which is priced into the market, but income stocks in particular will react negatively as interest rates rise and bond prices drop. Hence the analysts’ moves away from the utilities and telecommunication service stocks. Overall, I’d be happy with a modest 7% gain and a 2%-3% dividend payout for an up to 10% total return for the year. Anyway, for the week, the Dow shed nearly 265 points, the largest point and percentage decline since mid August. The S&P 500 was lower by a hefty 29.8 points and the Nasdaq Composite fell over 1.5%; a healthy minor correction in my opinion.
On my Christmas list for this year, I would like to see Manitowoc separate its Food Service business from its Crane unit; big foreign telecoms stay out of Canada (or should I say oot?); Teva Pharmaceutical get its management act together; one of the large integrated oils make a bid for Hess; minor antitrust obstacles with the Applied Materials and Tokyo Electron deal (sorry Cramer); JPMorgan Chase keep out of regulatory trouble and Intel speed up its market share into mobile and tablets.
So, continue to enjoy the holiday weeks ahead and stay tuned for my updates on income and aggressive buttonwoodproject choices in upcoming posts.