03|04|2016

2014 Headwinds and Tailwinds

2013 posted the strongest market performance since the 90’s and the New Year began with some apprehension.  Let’s look at headwinds that could persist and tailwinds that could drive growth in 2014.

 

Headwinds:

Emergency Jobless Benefits expired with 2013, leaving 1.3 million people without benefits.  If not extended, the number will jump to 3.6 million over 2014 and represent over 1% of the population.

 

The Debt Ceiling debate could heat up during the 1st quarter. Given the backlash from the government shutdown last October, it’s doubtful that much will be made of the issue, but you never know.

 

Tapering starts this January and should continue to increase in impact throughout the year.  The Fed has been very clear they would reverse course and potentially add stimulus if the economy weakens.

 

The ever present unknown… Some things can’t be forecasted, such as the earthquake that rocked Japan a few years back. Events like this can have strong economic impact, but cannot be accounted for.

 

Tailwinds:

Improving unemployment has a tremendous impact on consumer confidence.  The unemployment rate will see a falsified decrease with the expiration of the Emergency Jobless Benefits Program.

 

Improving Consumer Confidence is always a closely watched statistic.   This statistic leads to consumer spending.  Consumer confidence increased to 78.1, an increase of 6.1 points in December.

 

Improving PMI data has stayed well above 50 (indicating expansionary conditions).

 

Improving housing data, such as year over year home price increases of 13.6% in October.  Demand has softened due to rising mortgage rates and price increases.  2014 could be a lighter year for real estate.

 

Benign Inflation continues to allow increasing wages and to lend itself to consumer spending.

 

If you would like an in-depth analysis of your current positions and allocation, please feel free to call Jason Roque at 719-313-7536 to schedule an appointment.

 

Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services.  Broad diversification across several asset classes with a long term holding strategy is the best strategy in any market environment.  Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.

 

Sources: mfs.com, oppenheimerfunds.com, investing.com, yahoo.com, and morningstar.com

 

* Financial Action, Inc. is a Registered Investment Advisor.