Fred Taylor //January 7, 2014//
Stock market investors certainly received a surprisingly large dose of good cheer in 2013. The S&P 500 produced the best calendar year return since 1997, when the stock market was up 33 percent. However, with corporate earnings and revenue growth mediocre at best, the gains in the S&P were driven by the low-interest policy of the Federal Reserve, an improving economy, and the simple fact that investors had nowhere else to earn income.
Of course, there’s no way to know for certain whether this positive trend will continue in 2014. However, data from Schaeffer’s Investment Research supports continued upward momentum. Since 1975, reports Schaeffer’s, whenever the S&P was up at least 20 percent at the end of the year, the following year the stock market was up an average of 12.84 percent and posted positive returns 82 percent of the time.
Another potential positive for market performance in 2014 is how well investors reacted to the news that the Federal Reserve Board will being tapering its massive bond purchasing program in January. While some speculated that tapering would lead to a sell-off, the stock market rallied instead, likely because the Fed’s move indicates that the economy is finally in recovery mode.
Given the recent economic and market trends, here are a few strategies for investors to consider adopting in 2014: