Sunday, January 5, 2014

As a New Year Begins

  • Each New Year brings many predictions about how markets will perform.  For 2014, the consensus view among many strategists is that equities will continue to deliver positive performance, with the potential for a 10-15% pullback along the way, while interest rate sensitive assets, such as bonds, will continue to struggle.
  • Several popular investment themes of 2013 will likely remain in focus this year including the evolution of 3D printerswearable technologydrones,roboticssolar and other alternative energy solutions, as well as demand for housing and services in support of oil and gas exploration.
  • Also, with concerns increasing about income inequality, it will be important to track activism in this area by a broad set of players including New York City Mayor Bill de BlasioPope Francis, the City of Richmond, CA – which is attempting to use eminent domain to restructure home mortgages for some of its residents, and Kshama Sawant, a Socialist that joined Seattle, WA’s nine-member City Council on January 1. (Note: Seattle is home to AmazonBoeing and Starbucks.) 
  • Finally, as Colorado expands its legalization of marijuana, estimates suggest that annual sales could be about $578 million and generate more that $65 million in state tax revenue.  While marijuana remains illegal nationally, it is often cited as the largest cash crop in the U.S.
MY TAKE
  • Regarding global markets – Because the U.S. Federal Reserve’s stimulus efforts significantly affect the performance of many markets. its leadership transition from Ben Bernanke to Janet Yellen is an important event. Given the fragile nature of the economic recovery, a honeymoon period is unlikely and signs of economic weakness could reverse it current view for reducing stimulus.  Such a move could trigger increased market volatility.  
  • Regarding popular investment themes - many investors search for the “the next big thing”, but 2014 will likely be a year of incremental improvements to products and services.
  • Regarding income inequality – It have been suggested that several developed economies are going through a structural change, this challenging environment will likely trigger increased citizen activism.
  • Regarding marijuana – as Colorado continues to release official data on its sales and tax revenue, it will reinforce the view that marijuana is big business. It seems only a matter of time before other states move forward with similar initiatives.

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