The year 2013 began with the government spending sequester in force and Washington playing a large-scale game of brinksmanship with the budget ceiling and government shutdown-yet an old stock market adage still rang true: the stock market likes to climb a wall of worry. Markets certainly did that in 2013 with the S&P 500 posting a handsome 24.5 percent gain for the year after coming off a 2012 that gave us a not-too-shabby 16 percent return. With the start of the new year, we begin to wonder what 2014 might bring. 

With the global banking crisis firmly in the rearview mirror, the U. S. budget deficit shrinking, Europe muddling through and global economic growth on firmer footing, we ask, what does the market have to worry about now? And what is history's view of what might be in store in the year ahead?

We view 2014 as a year where it will be tough for the stock market to do a three-peat following the strong performance of 2012 and 2013. Instead, we expect returns from the stock market to be more in line with historical averages. We will be looking for a strong start to 2014, followed by a weak middle part of the year that sets up for a rally into year-end 2014, consistent with seasonal tendencies. We will continue to favor stocks over bonds and cash on a risk-adjusted basis, and will look for opportunities to add to stocks on weakness where appropriate.

For more information about your specific investment needs in the coming year, feel free to contact us.