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Why 2013’s market losers could be 2014’s top trades

Pras Subramanian

Traders on Wall Street took a breather yesterday, as a flat trading day was a relief considering the carnage meted out on Monday, the first trading day of February. To wit, the Dow (^DJI), S&P 500 (^GSPC), and Nasdaq (^IXIC) all tumbled 2% to start the month, and after a not-so-hot January investors wouldn’t be blamed for wanting to execute some sell orders post-haste.

2013 was a year that may have spoiled less-experienced investors into thinking stocks typically rose in a nice upward-sloping fashion without many hiccups. Many market vets will tell things are a lot more volatile in the financial markets, and Erica Coogan of Moss Adams Wealth Management says this is likely to continue.

As a wealth advisor Coogan’s outlook is typically more forward looking. “I would expect continued volatility” here and in places like emerging markets, she says, but there are opportunities for investors who are more longer term in nature (i.e., holding assets for 10 years or so). That being said, she cautions to not be afraid to trim some positions and book gains on over-performers from last year.

If you’re a trader with a short term, quick strike mentality, then in order to battle a market where asset correlation is no longer a reality (and therefore acting more like a normal market), Coogan recommends certain sectors coming off poor performance relative to other sectors.

“I wouldn’t expect lock-step [correlation] here,” Coogan says, and she suggests taking a look at the beaten up Energy sector (XLE), as well as REITS (VNQ), or real estate investment trusts. “REITS are actually slightly positive” in 2014 while overall market is down, she notes.

“Making sure that you have some things in the portfolio that don’t necessarily correlate to the traditional market I think is really critical,” she concludes, “especially if we’re anticipating there might be some continued volatility here.”

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