2014 is going to be an amazing year. Predictions are worth precisely zero, especially once the clock is running and new information comes at you. However, they are fun to laugh at a year later.
Here are mine, in no particular order:
Capital flows continue on the path of least resistance toward developed economies. Volatility will bite down hard, but S&P 500 continues in a long-term bull market. Our studies identified several historical market cases which model a relatively big correction in the first half of the 2014, after which the market begins to really accumulate upside momentum (I’ll do a post on this). I expect the economy of the US will fully recover from the 2008 financial crisis in by the end of 2014, and we will head into the next phase of the bull market and the generation of the next (real) bubble.
Supposed hard assets (Gold and Bitcoin) become even more synonymous with volatility and risk rather than stability and opportunity. Bitcoin does still have a chance at a moonshot, though.
More of main street steps out of the shadow of the 2008 crisis. Liquidity gradually makes its way into the real economy and actual business development activities. Startups and business creation gather momentum as capital allocators realize that ZIRP money unattached to a great project is dead capital.
A new round of wealth generation begins in China. New government ushers in a huge prosperity for the new political class. Those clinging to power from the old establishment are out, and the assets are shuffled to the new political elites. Opportunities will be manufactured to fuel the prosperity of rulers. China’s government has started to work on its poor debt situation with local governments. A new round of asset allocation will start in a year or two. The real estate market bubble makes this a binary play, but massively skewed to the positive.
Companies performing head-to-head with Asia (China, Korea, etc) lose big (think: $CREE and $BRCM). Companies that stuck with the globalization trend win big (think: $DIS and $C). There are countless others and they will emerge throughout the year.
Active managers and hedge funds finally bottom out and significantly outperform passive strategies.
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