OCEAN CITY — For the average equity investor, 2013 was certainly a year to celebrate. As financial markets and the global economy continue to normalize, we outline some key investor resolutions for 2014.
Resolution #1: Pay attention to the economy and the Federal Reserve. The macroeconomic backdrop has been a critical determinant of asset performance in recent years. We think that will continue to be the case in the year ahead.
Resolution #2: Check on corporate America’s earnings. A key feature of this year’s equity market gains has been multiple expansion — an increase in the price/earnings ratio. We are optimistic that improving economic growth should support stronger earnings growth with U.S. and global GDP accelerating in the year ahead.
Resolution #3: Temper enthusiasm for equities. Few investors expected stocks to perform as strongly as they did in 2013. At the beginning of the year even the most bullish sell-side strategists were only looking for gains of around 13%. But after a 30%+ rally, the S&P 500 index is no longer undervalued but rather is closer to fair value, in our opinion. That’s not to say we are not constructive on U.S. equities.
Our expectations are more in line with long-term equity returns. At present, BofAML Global Research forecasts the S&P 500 to finish 2014 at 2000, or just 9.0% higher than its current level, generating less than half the returns for 2013.This brings us to the final resolution.
Resolution #4: Invest according to goals. As past CIO publications have noted, we believe investors should first and foremost invest according to their goals and regularly measure progress toward them. U.S. equities have had a great run, with the S&P 500 rising more than 150% from the lows of 2009. As the global economy and asset markets begin to normalize in 2014, we recommend clients consider rebalancing their portfolios, if need be, and bring them more in line with their strategic asset allocations.
A proper rebalancing plan is one way to reduce the likelihood that such deviations from goals-based allocations could become unintended risks. Happy investing in 2014.
(A Merrill Lynch Wealth Management Advisor who can be reached at 410-213-8520.)
OCEAN CITY — Investors are looking at another strong year of equity returns, with the S&P 500 up more than 28% at the end of November. A key feature of this year’s equity market gains has been multiple expansion — the increase in the price/earnings ratio. However, with the Federal Reserve likely to start tapering in early 2014, we believe … Continue reading
OCEAN CITY — Among life’s transitions, dealing with a family estate — and the sale of the family home — may be the most trying. Few transactions have the potential to be as emotionally charged. Yet those emotions can interfere with the many important decisions that family members must make together. “Even if you all agree that it’s necessary to … Continue reading
OCEAN CITY — For most business owners, retirement is either a subject they welcome, or the last thing they want to think about. If you’re looking forward to that day, you’ve probably already started preparing to move on from your business. If you’re not, bear in mind that there are real advantages to beginning to prepare for it now. Doing … Continue reading
OCEAN CITY — Today, working in retirement isn’t a purely financial decision. Americans are living longer, and in a world where the average 65-year-old can expect to live well into his or her 80s, what were once known as the post-work years have become the springboard for new, fulfilling journeys — each different from the other. “Our whole concept of … Continue reading
OCEAN CITY — At age 65, you’re finally eligible to enroll in Medicare and reap some benefits from a program you’ve contributed to all these years. Yet getting the most out of Medicare can be daunting. According to the National Council on Aging, more than half of Baby Boomers ages 60 and older find the program and its alphabet soup … Continue reading
OCEAN CITY — Becoming a grandparent changes everything — including, often, your approach to your finances. When you hold the next generation in your arms for the first time, chances are good that money won’t be uppermost in your mind. But it won’t be long before you begin to think about how you can help to create a solid financial … Continue reading
OCEAN CITY — “Going global” has never been more important when it comes to investing. But in recent years, even as many investors have looked overseas for growth, one key area of the world has continued to cause turmoil in the markets. Since 2010, Europe’s economic woes — from a banking meltdown in Cyprus to dispiriting unemployment figures out of … Continue reading
OCEAN CITY — In the wake of the financial crisis five years ago, many people understandably shifted away from equities. In a “flight to safety,” they switched to U.S. Treasury securities and other fixed-income holdings. Recently, as the economy began to show signs of a sustained recovery, the stock market rose to fresh highs. But many people remain reluctant to … Continue reading
OCEAN CITY — With interest rates hovering around their historical lows, many investors in recent years have been looking beyond Treasuries and other high-quality bonds to dividend-paying stocks. But not all dividend-paying stocks are created equal. And in today’s markets, you might consider focusing on companies that are increasing their dividends. According to Savita Subramanian, head of U.S. Equity and … Continue reading