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2014 Stock Picks and the 2014 Stock Market Outlook

Five years into a powerful bull market, stocks are poised for more growth. Another year of gains will be supported by stronger economic and corporate underpinnings, as well as improving sentiment among investors. By most measures, stocks are fairly priced, if not bargains. This solid underlying support is like a giant spring board for Catalyst Stocks daily stock picks.

2014 Stock Picks

After all, the recent move to record highs is not a fluke. Even though there were hints that the Federal Reserve was about to turn off the low-interest-rate stream of optimism, the government shut down and the American debt default specter started to stir once again, the stock market just kept going. Corporate profits were not great, and those are usually seen as the primary engine for the market, and yet the market just kept going.

So where is this bull market coming from? What is its likely stamina in 2014? Henry Smith, Haverford Trust's chief investment officer, predicts, “We don't see a bear market coming. We believe that March 2009 represented a generational low, and that this is the middle of a sustained bull market.”

As far as 2014 goes, the economic basis of the country will strengthen, and corporate profits will tick up as a result. This will lead to another year of growth, as will the building optimism out there among stock investors. Most metrics show that investing in stock picks can bring you a fair return, if not beat the market time and time again. Because earnings are anticipated to grow about 10 percent in 2014, we believe that stock prices will also go up that much and even more, if investors continue to show that they will pay more as corporate profits climb, boosting the price-to-earnings ratio in the market. You can reasonably expect a growth rate of 8 to 12 percent in returns (dividends included). If things went up 8 percent, the S&P 500 would land around 1,940 and the dow would end up around 17,300.  These figures are for buy and hold; by trading stock picks on a regular basis, these numbers could be significantly greater.

It's not just the corporations that we think will do well. We estimate that gross domestic product will grow by about 2.5 percent, about double our estimate from 2013. Wages will increase at a faster rate than inflation for the first time since 2009, as inflation is expected to go up about 2 percent, but personal income should go up about 3.5 percent. Payrolls will keep growing, and more people will take up the search for work. One hidden truth about unemployment is that people who lost their white-collar, professional jobs simply stopped looking because of a lack of available positions. The same is true in the service and retail professions, and those are both starting to grow once again. It is likely that short-term interest rates will stay around zero through all of 2014, but as investors start to predict more growth, the longer rates will start to perk up. We predict that the ten-year Treasury bond will up its yield from around 2.8 percent today to 3.3 percent by the end of 2014.  Home sales are a particularly strong source of optimism, as new-home sales should jump as much as 17 percent. As China and Europe right their economies, US exports could go up by as much as 4 percent.

Are there some wild cards? Of course there are. Early 2014 will feature the next round of battling in the Congress as the debt ceiling comes back into play. However, it is the Federal Reserve that we will really be watching. If rumors come true and the Fed starts weaning itself off the bond-buying program that currently infuses $85 billion each month into the market, then there could be a significant “market correction” (read: drop). However, just be patient and ride along through it. Things will pop back up, because it is clear that the Fed will not do this until the economy is healthy enough without it.

Stay focused on the profits that corporations are making. Many of them right now are coming from cost-cutting. As more profits come from increased sales, you'll see that the recovery is really well underway.



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