2014 Stock Market Forecasts

November 26, 2013 by Thomas F. Burke, P.C.

The Wall Street Journal reported that many stock market strategists are expecting the stock market to cool significantly in 2014. They see returns in the mid-to-high single digit percentages for the S&P 500 Index in 2014 because of the economy. The January 15th US Government funding deadline, February 7th Debt Ceiling deadline and the Fed transition/QE tapering dialogue are sources of near term risk. No one knows what the consequences of Obamacare will have on the markets. Additionally, the Fed might start to tighten its easy-money policy, which they believe is a key reason why the markets have performed so well this year. These forecasts could be adjusted upward if interest rates remain low or if there are changes to the economy.

Stock strategists traditionally have been cheerleaders when forecasting year ahead outlooks. Since 2000, stocks have returned an average annual gain of 3.3%, well below the 10% predicted by strategists. Furthermore, they missed all four years when the stock market declined. However, stocks outpaced analysts forecasts in seven of those years.

In 2013, stocks have risen faster than earnings. Both the Dow Jones Industrial Average and the S&P 500 set record highs in November. They have returned 29% so far this year. Conversely, gold has fallen more than 25% since January 1, 2013.

Hedge Fund Manager Carl Icahn is quoted as saying that he is "very cautious" on U.S. stocks, which could easily have a big drop" from their new record highs. Warren Buffett says the U.S. stock market is valued "in a zone of reasonableness." Oppenheimer expects the market to continue its bullish behavior into next year, with the S&P 500 index finishing the year 2014 at the pinpoint figure of 2014. The number actually represents the midpoint of two proprietary models that were used to predict the market. UBS year end prediction for 2014 has an S&P 500 Price Target of 1,950, which would represent a gain of 10.1% from the current price of 1,771.

Some other strategists' forecasts 2014 S&P 500 forecasts:

  • Morgan Stanley: 1,840 (12 months from September)
  • Deutsche Bank: 1,850
  • Citi: 1,900
  • Credit Suisse: 1,900
  • Goldman Sachs: 1,900
  • RBC: 1,950

According to Bloomberg, the median 2014 forecast is 1,900.

No one knows for sure what the future will bring, but it will be interesting to see who was right and who was wrong.