Todd Market Forecast for January 13, 2014
LOOK FOR 2014 TO BE A DOWN YEAR.
There are no guarantees in this business, but consider the following: The Dow has been up for 5 years in a row. Since 1901, there have been only three other
times when this happened. The 1920s, 1940s and the late 1980s. There has been only one period when there were more than 5 up years in a row. That was in the
1990s when the Dow moved up 9 years consecutively. In other words, we are overextended. Based on history, we are due for a down year. And how about this?
The S&P 500 was up almost 30% in 2013 while earnings were up only 3.4%. And we are currently getting a lot of lower earnings estimates. The first two days of
January are almost always up because of new contributions to pension funds. If they don't move higher at this time, it tends to be a bit worrisome. Since 1987
the first two days have been down only 4 times. In three of those years, the year was also down. And 2014? The first 2 days were down. The effects of the
Affordable Care Act are unknown, but if the anecdotal evidence of people seeing premium increases becomes a significant statistical event, we could see less
consumer spending. Consumers are 2/3 of the economy. Finally, bullishness is everywhere. In listening to analysts in the business media, it's almost
impossible to find bears. People tend to become bullish at tops and bearish at bottoms. Look at the chart below. The Investor's Intelligence survey of
investment advisors shows the lowest number of bears in a number of years.
Decision Point®: Todd Market Forecast -- Steve Todd
