Goshen News, Goshen, IN

Business

January 1, 2014

2014 stock market slowdown expected

NEW YORK — 2013 was a great year for the average investor, but few market strategists believe that 2014 will be anywhere near as good. The simple strategy of buying U.S. stocks, selling bonds and staying out of international markets isn’t going to work as well as it has, they say.

Some of Wall Street’s biggest money managers have come up with a few resolutions to help your retirement portfolio have a good year:

• Curb your expectations

Few investors expected 2013 to be as big as it was. The Standard & Poor’s 500 index is up 29 percent for the year, its best year since 1997. Including dividends, it’s up 32 percent.

On average, market strategists expect 2014 to be somewhat tame. Most are looking for the S&P 500 to rise to 1,850 to 1,900 points, a gain of just 1 to 3 percent.

• Keep your eye on valuation

Investors bid up stock prices to all-time highs this year, despite a mediocre economy and corporate profits that were less than spectacular.

At the beginning of the year, the price-to-earnings ratio on the S&P 500 was 13.5, meaning investors were paying roughly $13.50 for every $1 of earnings in the S&P 500. Now the S&P 500’s P-E ratio is around 16.7.

While a P/E ratio of 16.7 won’t set off any alarm bells — the historical average is 14.5 — it is noticeably higher than it was a year ago.

Investors have high expectations for corporate profits next year, based on the prices they are paying.

“It’s hard to believe that this market can go much higher from here without some corporate earnings growth,” said Bob Doll, chief equity strategist at Nuveen Asset Management.

Profit margins are already at record highs, and corporations spent most of 2013 increasing their earnings by cutting costs or using financial engineering tools like buying back their own stock.

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Poll

Three Goshen elementary schools — Chandler, Chamberlain and West Goshen — are providing free meals to all students during the school year as part of the U.S. Department of Agriculture’s Community Eligibility Provision of the Healthy Hunger-Free Kids Act of 2010. Nearly 80 percent of students at Chandler, 89 percent of students at Chamberlain and 78 percent of students at West Goshen already qualify for free or reduced-price lunches based on their family income. How do you feel about the new lunch program?

I think it’s a good idea to feed all the students free of charge
I think those who can afford it should pay for their school meals
I think all students should be required to pay for their school meals
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