Stocks had a great 2013. Can we expect the same for 2014?
As 2013's record year comes to a close, and as the Federal Reserve Bank begins tapering its asset purchasing program ("quantitative easing"), will 2014 be another banner year for stocks?
Chad Morganlander, portfolio manager at Washington Crossing Advisors, believes the US market benchmark S&P 500 index will close next year on the positive side. But he doesn't expect it to be smooth sailing the whole way through.
"We expect a positive return for next year, roughly a 4% to 7% return on the upside," says Morganlander of the S&P 500. "But, we do expect there to be turbulence going into the first quarter of this year as the Fed curtails its asset purchase program. Let's face it: The market over the last 18 months has been surfing this sea of liquidity provided by the Federal Reserve. So, as they start to pare back that asset purchase program, you should start to see volatility go up."
Morganlander expects earnings of $115 per share for the S&P 500 and a GDP growth rate of 3% of the US economy. "That's led by private credit creation as well as business credit creation," says Morganlander. "That's the real driver that you need. What's happening here is that deflationary or that debt pay-down cycle has abated and you're starting to see credit creation expand."
(See: CNBC's US markets coverage)
Jeff Tomasulo, Managing Director at Belpointe Alternative Investment, says the technicals are pointing to a correction. The market corrected twice before in the last decade trying to break above the 1,550 mark in the S&P 500. Now that it's around the 1,840 market, Tomasulo believes the index could revisit its previous resistance – now support – level.
"So, I would be looking in 2014 for some type of correction, anywhere between 10% and 15%," predicts Tomasulo.
To see the rest of Morganlander's fundamental analysis and Tomasulo's charts on what's next for the S&P 500, watch the video above.
More from Talking Numbers:
- Investment & Company Information
- Federal Reserve Bank