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“Many happy returns” is an oft-used phrase when entering a new year. Investors will be very happy if this year’s returns are anywhere close to what they were in 2013.
Put simply, 2013 was the best year for stocks since Bill Clinton was in office. The S&P 500 surged 29.6%, best since 1997. The Dow was up 27%, best since ’95. The Nasdaq topped them all, advancing more than 38%.
As usual in a bull market, small caps led the way with the Russell 2000 index soaring 39%.
The IPO market also set records. A grand total of 222 companies went public – most in more than a decade, and almost 100 more than the previous year. Collectively, those initial public offerings raised $55 billion, highest since the dot-com bubble days.
Blue chips, small caps, IPOs – no matter which stocks you bought in 2013, you probably did quite well. With stocks closing the year at all-time highs for the first time since 1999, similar gains in 2014 seem all but impossible. But that doesn’t mean it’ll be a down year for stocks.
Analysts have been forecasting a correction for months. Yet every time, the market has defied them, rising to fresh all-time highs on almost a weekly basis.
Even if a long-awaited 10% correction does arrive in 2014, that won’t necessarily preclude U.S. markets from having another strong year.
At this point, a correction would probably be healthy. It would allow stocks to pull back to more affordable levels, thus making them more attractive to the average investor. Right now the S&P 500 is trading at more than 20 times trailing 12-month earnings – its highest level in four years. A brief but forceful correction may trigger another mass spending spree on Wall Street.
Because really, the fact that markets are already at all-time highs seems to be the only thing preventing people from buying stocks these days – and even that’s not stopping many investors.
We saw that repeatedly last year. Alleged doom-and-gloom events such as sequestration, the government shutdown, another debt ceiling and, finally, the beginning of Fed tapering had little effect on the markets. Through all of those supposedly cataclysmic events, stocks continued to rise to new heights.
The investment waters are quite warm these days. Investors want to buy stocks.
And why not? While the U.S. economy still hasn’t fully recovered from the recession, GDP growth continues to improve and the unemployment rate is at its lowest level since 2008. At 7%, the jobless rate isn’t where most people would have liked to see it entering 2014. But it’s much better than the 9% rate we saw little more than two years ago.
Does that mean we should expect 2014 stocks to be anything like 2013 stocks? No. But it’s not unreasonable to expect more solid gains. There are plenty of deals still out there. Until a correction occurs, it’s all about finding the right value.
My colleague – Ian Wyatt – just discovered a surprisingly simple strategy that has consistently beat the market. Over the last four years, you could have earned annual profits of 32.8% using this strategy (versus 13.5% annually if you had bought the S&P 500 index).
All you need to do is buy 10 stocks at the start of the year. Yesterday, Ian released a special report titled My $20,000 Bet: How to Double the Market in 2014. The report includes all the details on this easy-to-execute strategy. Learn how to claim your copy of this special bonus report by clicking here now.
In the meantime, here’s hoping the good times on Wall Street keep rolling into 2014.