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US Stock Market Wall of Worry: Running of the Bulls in Full Stampede!

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But looking into 2014, it seems that there may be a chance to buy some stocks at reasonable prices.

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Happy New Year. We at the Wall of Worry wish you a very profitable 2014.

First, let's recap what happened in 2013. The Wall of Worry dropped like a rock and the Dow (INDEXDJX:.DJI), S&P 500 (INDEXSP:.INX), and Nasdaq (INDEXNASDAQ:.IXIC) rose like rockets. That's how it's supposed to work. Okay, enough back-slapping and gooey reminiscing; it's time to get after 2014.

We start at 15 worries, so not a scary level but not a nearing-complacency sub-10 number. That said, we could lose three worries by the end of January. What does that mean for the markets? Historically it means that while we are likely headed higher in 2014, it won't be the moon shot it was in 2013. You should get a chance to catch your breath and maybe even buy a few stocks at prices that are more reasonable.

We see the biggest potential speed bumps coming from an economic slowdown/scare in China, a banking hiccup in Europe, and less than robust earnings out of US companies in the first half of the year. There is always the chance of an unknown unknown, a black swan, out there, but if you haven't figured it out after 14 years of crisis-hopping, the black swans are always out there.

All the best in 2014, and thanks again for being a part of the Wall.

Here's a quick look at the worries facing stock market investors. Click on the image below for an interactive version of this week's Wall of Worry, or scroll down for the text-only version and an explanation of how the Wall works.



QUANTITATIVE EASING: Taper on. "Thank you, [ma'am], may I have another?!" And we haven't even had the first one yet.

UNEMPLOYMENT: Ready to bust through 7% in the US and 25% in Spain -- and both going in the right direction this time.

INVESTOR SENTIMENT: Pamplona has nothing on the equity markets as the bulls are running…for now.

EUROPEAN ECONOMY: The eurozone 2013 stock markets foretelling a stronger economy in 2014, and markets never lie, right?

HIGH-FREQUENCY TRADING:
Lloyd: Happy New Year, Hal.
HAL: Happy New Year, Lloyd.
Lloyd: Any New Year's resolutions?
HAL: Yup. I'm gonna be a buy-and-hold investor from now on.
Lloyd: New time horizon?
HAL: Up to 10 seconds.
Lloyd: Oh, how the mighty have fallen.

CHINA: The stated GDP growth number for 2014 is 7.5%. So it is said, so it is written, so it is done.

EXTENDED UNEMPLOYMENT BENEFITS: On Saturday, 1.3 million people ran out of them, and in June 2014, you can add 1.9 million more Americans to that number. Main Street still ain't Wall Street, High Street, the Champs-Élysées, Altamount Road, Rodeo Drive, or Wolseley Street, for that matter.

BONDS: Stop complaining about those monthly negative numbers on your account statements. You had a 32-year bull market and, in the end, you'll get your money back and interest while you wait. My professional advice? Don't watch the stock markets.

CONSUMER CONFIDENCE: Hanging ten and riding a big wave of optimism coming into the New Year. Just keep both feet on the board, dudes.

RETAIL SPENDING: Sales likely were good but-- . Likely done at 40-50% off, like that last sentence.

CONGRESS: Our 2014 laundry list of things for it to do is long, deep, and wide. Its internal list is a bit shorter as it starts and ends with "midterm elections" in November.

US ECONOMY: Three percent GDP growth or bust in 2014.

SEQUESTER II: If a sequester falls on the economy and nobody feels it, does it matter?

ECB: Planning to keep the monetary pump on max pressure, unless it breaks.

DEBT CEILING: An overwhelming mortal lock that it gets raised without a hitch…hence we worry.


What Is Lloyd's Wall of Worry?

by Lloyd Khaner

Welcome to my at-a-glance guide to the issues facing investors this week -- a unique tool for traders and money managers.

Typically the term "wall of worry" refers to the entire body of concerns influencing stock market action. When the wall is high, meaning the market is nervous, stocks tend to get cheaper.

This wall of worry is even more specific. Every week I list the exact concerns in the marketplace and use the list to help me make buying and selling decisions. As I like to say, "Buy fear, sell cheer."

In other words, once the the wall rises above 15 blocks, start looking for deals. If the worry count sinks below 10, consider selling; prices have likely peaked.
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Positions: SPY, DIA, QQQ, GLD, TBF, VGK, FEZ, EUO
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