2014 Stocks Outlook: Cautiously Optimistic


By Chris L. Meacham, CPA,

Cornerstone Wealth Management

Stock analysts are optimistic about stocks for 2014. Job growth has picked up. Congress appears ready to reach a fiscal deal. The Fed’s plan to taper its stimulus package proves the economy is getting stronger. In fact, according to the article “Recovery will prolong US stocks rally” on


Adam Parker, chief equity strategist at Morgan Stanley, believes the S&P 500 can rise more than 10 per cent in 2014. Most stock analysts, however, make a living by selling stocks, so we can’t take their predictions without a grain of salt.

Analysts, according to Patti Domm, CNBC Executive News Editor, are optimistic about 2014 because they say there is no one big catalyst to fear—one major event that can affect the stock market. However, although there might not be one big thing, it’s important to be aware of all the factors that affect the economy. So although there is largely a positive sentiment regarding the 2014 stock market, according to Domm’s article, “Five things that could go wrong in 2014 ” here are some economic factors to pay attention to this year:

Rising rates—

Although an improving economy should be able to withstand higher rates, rates might rise too high and too quickly. Analysts worry that the housing recovery could be affected if interest rates rise too fast. However, the Fed has stressed that it will keep short-term rates low for a long time.

Slowing profit growth—

Earning results start coming in mid-January, which, according to Jack Ablin, chief investment officer at BMO Private Bank, may be the first test for stocks. Some analysts believe that rising interest rates might negatively affect profit growth, while others believe companies have learned how to operate so efficiently that profits won’t suffer.


analysts worry that the economy could strengthen enough to stir up inflation, even as the Fed tries to keep rates low.


Even though most analysts believe that the flack Congress received over the government shutdown will prevent another debt ceiling crisis, the public might start worrying about political dynamics as the year goes on.

Geopolitical risks—

Although the outlook for energy is positive for the U.S., if the U.S. drives energy prices too low, it could affect the economies of Russia and the Middle East. China is in a credit crunch, but most analysts expect China to be a positive economic factor rather than a negative one. The economic instability of Europe, however, is troubling to some analysts.

Despite the positive outlook for 2014, at Cornerstone, we don’t try to predict the future, but continue to prepare portfolios for various possible outcomes by properly diversifying into multiple asset classes in the public and private arena.