Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stocks, Bonds and Gold - The Best Way to Compound Your 2013 Gains

Stock-Markets / Financial Markets 2014 Jan 08, 2014 - 01:32 PM GMT

By: Money_Morning

Stock-Markets

Robert Hsu writes: With the exceptional, unpredictable year that was 2013, we have a one-time opportunity to "mine" its insights... and make even more money in 2014.

The trick, as you'll see, is to block out the noise, stay invested, and focus on three key numbers...


No. 1
The S&P 500's Double-Digit Earnings Growth

2013 was one for the record books. The S&P 500 Index had its best year since the bull market of 1997, vaulting nearly 30%, while the Dow put in its best showing since 1995, spiking 26.5%. Both major indices finished the year at record highs, but the real winning market segment was the Nasdaq Composite. The tech-heavy index still is well below its "irrationally exuberant" all-time high, but its gains far outshined the other major indices in 2013, with a tremendous bull move of more than 38% during the year.

The stellar year in equities took place during a year fraught with all sorts of exogenous threats, concerns, and issues that stimulated the fear mechanism inside the lizard brains of many on Wall Street.

This year's biggest boogeyman was fear over the Federal Reserve and its decision to "taper" its massive and unprecedented $85 billion per month bond-buying program.

Though the Fed's next move was the biggest point of concern among market watchers, there were other threats that kept many otherwise intelligent investors from participating in the broad market gains.

Earlier in the year there was the debt ceiling debate, and then renewed debt default fears in European hot spots such as Cyprus, and then the China growth-rate slowdown. Then late in the year there was the government shutdown.

Each of these circumstances caused a lot of noise that bears seized upon.

What flew quietly under the radar was that the Dow Jones Industrial Average's aggregate earnings rose more than 16% from $901 to $1,045 in 2013.

This metric was really the only thing that truly mattered last year, and it was the fundamental force that moved the Dow Jones, the S&P 500, and the Nasdaq.

Although we won't get readings on Q4 earnings for a few more weeks, we did see very strong earnings for the third quarter.

Moreover, macroeconomic data - such as the upward revision to a relatively robust 4.1% Q3 growth in GDP - bodes well for both earnings and stock market performance in 2014.

So ignore the noise, focus on earnings, and stay invested until the earnings picture changes.

No. 2
The 10-Year Treasury Yield

For more than three decades - and with just a few exceptions - we witnessed a steady decline in the cost of borrowing. Short-term interest rates dropped from 15% in 1981 to their current level of near zero early last year.

Debt securities, such as Treasury bonds, which move in the inverse direction of interest rates, enjoyed a generation-long bull market, but in 2013 that party finally started to come to an end.

The Fed's mid-year taper hint, and the aggressive action traders took to move away from long-maturity Treasury debt, caused the value of many bonds to sink in 2013. For example, the iShares Barclays 20+ Yr Treasury Bond (ETF) (NYSEArca: TLT), an exchange-traded fund that tracks U.S. Treasury bonds with remaining maturities greater than 20 years, tumbled nearly 14% in 2013, a record outperformance of stocks over bonds.

Yet, because the bull market in bonds was so long, many investors had virtually forgotten that rates can rise and bond values can go down. As the economy improves, and as the Fed removes itself from the bond-buying equation via tapering, interest rates are likely to continue to move higher in 2014.

In short, when considering fixed incomes, remember rising rates are back in the mix and will impact your returns this upcoming year.

No. 3
The Price of Gold

Picking a bottom in a sector is something that traders and investors try to do for understandable reasons. It follows the old adage, buy low, sell high; If you can get in on a market sector while it's at the bottom, there's virtually no other way to go but up.

In 2013, many investors tried to pick the bottom in gold, and the result was they found themselves riding the yellow metal down, down, down. In fact, in 2013 gold prices plunged 28%, the biggest drop in 32 years and its first down year in 12 years.

Gold deserves a permanent place in most balanced portfolios, of course, but when it comes to a year when gold could move lower still, it's best to focus on total return.

Source : http://moneymorning.com/2014/01/08/best-way-compound-2013-gains/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in