Friends
With just one more trading day left in the year, despite today’s lack of activity, it’s been an amazing year. A year ago at this time, we were concerned with the “fiscal cliff”, budget battles, the debt crisis, Obamacare, a potential government shutdown (which did happen later in the year) and “sequester” (which also occurred). As the year progressed we were forced to deal with North Korean saber rattling and a collapse in Cyprus, not to mention a major U.S. city going bankrupt (Detroit). We saw interest rates on the 10 year Treasury note climb from 1.60% to 3%. It was feared all year long that the Fed was going to take the punch bowl away at some point and squash the liquidity that fueled stocks for the past few years (and the Fed did indeed announce the beginning of the tapering process). Certainly the stock market had to suffer great losses given all these events and worries.
On the contrary, the market is poised to post a 25% gain, climbing the proverbial “wall of worry” all year long. Last year at this time, very few were interested in taking on more risk. Quite the opposite, as most were quite concerned that politicians and a lack of fiscal responsibility, were certain to send stocks downward. Fast forward to today, and individuals are seemingly much more comfortable increasing their risk profile. Heck, compared to last year, everything seems positively rosy right now. Money is flowing into stocks instead of out of them as in past years. Animal spirits have arisen once again. What a difference a year makes.
As for today, the Dow Jones Industrial Average was up 25 points to close at 16,504. The S&P 500 was down a fraction to finish the day at 1841. Gold was down $17 to trade at $1196 per ounce, while oil was down $1.07 to trade at $99.25 per barrel WTI.
Will those who missed the move this year try to make up for lost time and pile into stocks in the first part of the year (the hedge fund community in general had a very underwhelming year – as they heeded the global warnings and took bearish stands)? Is this just the natural progression of a bull market as we move from doubt to acceptance? Or perhaps there is no more “wall of worry” to climb, and the interest by individual investors is an indication that a trap is being set, just when it seems to be safe to enter the water once again. Yes, as bad as 2013 looked one year ago today, 2014 looks like a very nice setup. If we could only fast forward one year to see how it will all play out. Ah, it’s never that easy.
Have a nice evening everyone.
