For many, 2013 brought satisfying market returns, but upon reflection, and pondering what lies ahead, one would do well to recall a “tradition” among fortune cookie aficionados: To spice up your fortune add the words “… in the sack” to the end. Scintillating, perhaps, but really not such a bad idea as it reminds us to not take any prediction too seriously, especially one found inside a fortune cookie.
And if that can work for a fortune cookie, then how about a Wall Street pundit? Whenever one claims to “know” what is going to happen next, why don’t we append that prediction with “… or not” to remind us that nobody can read your investment fortune. For example:
- The stock market is poised for a continued run in 2014 … or not.
- Stocks are too hot. Brace yourself for an adjustment … or not.
- Federal tapering will cause bond yields to fall … or not.
- Home price growth is set to slow in the coming year … or not.
At any time, it is near impossible to predict whether or not it’s the right time to buy, sell or hold any investment. Rather than basing your decisions on pundits’ predictions which attempt to time the market, look to evidence from well-known economists and academicians such as Eugene F. Fama, a University of Chicago Professor and Dimensional Fund Advisors board member. Last year, Dr. Fama received the Nobel Prize in Economics for his groundbreaking work on the relationships between market risk and expected return. We apply those insights to cost-effectively expose your investments to market factors so expected long-term returns complement your financial goals. We also diversify your holdings – and stay diversified – to mitigate related market risks.
By devising a clear, evidence-based plan for achieving your personal goals, we eliminate the angst of trying to predict what 2014 has in store and focus instead on manageable factors. Yes, you may find our advice somewhat repetitive and not nearly as entertaining as “You will soon meet a tall, dark stranger,” but we believe that that advice still holds the most promise in helping achieve your own financial fortune.
The Year (and Quarter) in Review
It was a relatively quiet fourth quarter on Wall Street. Surprisingly, the day that many equities investors feared – the Federal Reserve’s announcement of tapering – turned out to be the quarter’s best trading day. Financial markets will be navigating unfamiliar terrain as the Fed begins to taper and considers still more…or not. The quarter’s biggest headlines came straight from the nation’s capital: “Federal Government Closed” and “Obamacare (fill in the blank).” Fears of another shutdown dissipated when the House and Senate arrived at a 2-year budget agreement in December.
Economic indicators show that the recovery continues to gain momentum.
- The employment picture steadily improves and the unemployment rate remains at a 5-year low of 7%.
- 4th quarter GDP growth beat expectations at 4.1% and the Purchasing Managers’ Index showed the 47th consecutive month of expansion.
- At 1.2% inflation remained well below historical averages, allowing the Fed to begin QE tapering.
- Despite some headwinds the housing market showed resilience; the Commerce Department said that November’s 23% jump in housing starts was almost 30% ahead of last year.
- Retail sales showed a 2.6% improvement over last year despite heavy discounting and a shortened holiday shopping season.
- Gold lost much of its luster, falling by nearly $500 an ounce over the course of the year.
On a Personal Note
The fourth quarter of 2013 has been very eventful and all in a good way. On December 21, 2013 Jamie married Jayson Martherus in a lovely ceremony at Little Corona Beach. Over the Christmas break, we spent a few days in Palm Desert with Jamie’s new family and Adam’s family. It was truly a special time. And, drum roll please, yours truly is a newly certified scuba diver (with a trip to Bali planned for October 2014). I’m looking forward to a wonderful 2014 and hope to help you plan something meaningful for you in the coming year.
Stay Optimistic and Stay the Course,