Predict, forecast, divine, foresee… Each year, pundits, analysts, and authorities from around the world offer investors insight to what the year may hold. While prognosticating brings to mind the words of British Prime Minister Winston Churchill who said, “It is always wise to look ahead, but difficult to look further than you can see.” With that firmly in mind, let’s take a look at what some experts have been saying about 2014.
Last week, economists at the World Bank released their latest growth forecast which projects global economies will expand by 3.2 percent this year. That’s an improvement over last year’s growth rate of 2.4 percent. Developing nations are expected to grow faster than high income countries. The Global Economic Prospects report cautioned, “Growth prospects for 2014 are, however, sensitive to the tapering of monetary stimulus in the United States, which began earlier this month, and to the structural shifts taking place in China’s economy.”
The 10 active money managers sitting at Barron’s Roundtable found little to agree about as they discussed interest rates, stock prices, gross domestic product (GDP), and what to have for lunch. According to Barron’s:
“The Roundtable's optimists expect the global economy to pick up, bonds to tick up, and stocks to mosey higher, notwithstanding the errant hiccup. The pessimists… see crippled economies here and abroad, rotten government policies, and a selloff in stocks that could rekindle fears of, yes, systemic risk. Yet, somewhere between these poles, all say, lie plenty of investments worth a wager...”
And, what does the new chairwoman of the U.S. Federal Reserve expect? After all, according to The Wall Street Journal which reviewed more than 700 predictions made by Federal Reserve officials about growth, jobs, and inflation, Janet Yellen made the most accurate forecasts from 2009 through 2012. In an interview published in Time Magazine this week, Yellen said the Fed's policymaking committee generally is hopeful that U.S. economic growth could be upwards of 3 percent during 2014. Additionally, she anticipates inflation will move toward 2 percent and the housing market will pick up and continue to recover.
Ms. Yellen offered no prediction about another subject of great concern to many Americans – the outcome of Super Bowl XLVIII.
Data as of 1/17/14
1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 (Domestic Stocks) -0.2% -0.5% 24.2% 12.4% 18.0% 4.9%
10-year Treasury Note (Yield Only) 2.8 NA 1.9 3.4 2.4 4.1
Gold (per ounce) 0.5 4.0 -25.4 -2.8 8.5 11.9
DJ-UBS Commodity Index 1.2 -0.5 -11.1 -8.3 2.5 -1.3
DJ Equity All REIT TR Index 0.4 2.7 1.9 10.3 19.9 8.9
Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
IF YOU’VE EVER DOUBTED THE IDEA THAT CHANGE IS CONSTANT, JUST CONSIDER THE LAST COUPLE DECADES. Businesses that once were thriving have languished. Industries that were lynchpins of American capitalism have gone the way of the Pony Express. Here are a few examples of things that have changed in recent years:
• Telephones: More than 90 percent of American adults own cell phones, according to the Pew Research Center, and more than one-half rely on that Swiss army knife of communication, the smart phone. The popularity of cell phones put public payphones on the endangered species list and may prove to be the downfall of landlines. According to a Center for Disease Control and Prevention report, almost 40 percent of American homes have only cell phones. That’s a big change from 2003 when the percentage was less than 5 percent of households.
• Books: Electronic publishing platforms mean authors have the option to publish carefully-scribed works themselves and make the books available to the public at bargain prices. Digital books have made access to the written word easier and, one can only hope, they may lead to primary and secondary schools being able to offer the most up-to-date textbooks to students.
• Movies: A new Harris poll found two-thirds of Americans go to the movies less often than they did a few years ago. The majority prefer the convenience of watching what they want, when they want, in the comfort of their homes. Instead of going to the theater, they own or rent DVDs and Blu-Rays, subscribe to movies-on-demand or streaming services, and record movies played on TV for later viewing. Of course, the medium for movie watching has also changed. In addition to the big screen, you can view a film on your tablet, smart phone, wall-sized television, or another device.
The world is changing all the time. While it is impossible to predict which trends have momentum and staying power, industries in transformation often open new opportunities for investors.
Weekly Focus – Think About It
“It's not that I'm so smart, it's just that I stay with problems longer.”
--Albert Einstein, Theoretical Physicist