Five Reasons That 2014 Could Be Another Great Year for Stocks

By Oliver Pursche  SEP 12, 2013 12:10 PM

Now that the Fed is likely to start taking its foot off of the gas pedal, pundits and investors are wondering if the rally can continue or if a meaningful correction looms.

 


Five years after the fall of Lehman Brothers and one of the steepest market corrections in modern history, stocks are trading near all-time highs; they are up over 150% since the March 2009 lows. Thank you, Uncle Ben; your loose monetary policy measures, generous asset purchases, and forceful intervention in credit markets have been the key drivers behind the market rally.

Now that the Fed is likely to start taking its foot off of the gas pedal, pundits and investors are wondering if the rally can continue or if a meaningful correction looms. Of course, I expect there to be a short-term market correction, and an overreaction to any news of asset purchase tapering or to news headlines proclaiming trouble in the Middle East or some other geopolitical crisis.

Putting these (very normal) short-term events aside, I believe that markets will test and ultimately set new highs. Moreover, I think 2014 could be another record year for stocks, and here’s why.
Although there are no guarantees, and vigilance is always appropriate, the stage appears set for another great year for stocks. Much like this time last year, when few investors believed that stocks could or would rise another 10% (the S&P was below 1,400 at this time last year), positive surprises are more likely than a prolonged correction. Smart and successful investors will recognize that the wind is in their sails and that they have the opportunity to invest in a relatively conservative portfolio of high-quality, dividend-paying stocks that should perform well over the next 12 to 18 months.

Follow Oliver Pursche on Twitter: @opursche, and see Gary Goldberg Financial Services for more.
No positions in stocks mentioned.