A Follow-Up To Yesterday

A final thought  to what I said yesterday.  It is unclear how much that last thrust higher in 2013 took away from 2014's gains, but it is obvious that the market has at the very least been struggling with valuations at current prices.  Stocks are up between 1-2% in 2014 and that's a much slower start out of the gate than we've seen in the past few years.  I think we will perhaps see more volatility in the coming months and it's possible a correction of 10% or more could be in the offing.  Stocks will finish the period in which they've historically seen the largest percentage of monthly advancement soon.  Historically that's been late fall of the previous year to mid-march-early may of the following year.  

This is what we said earlier this year  in our Winter Letter to Clients:

"One thing we can say is that stocks no longer appear to be cheap, yet they are not expensive by historic measures either.  Today they appear to be fairly valued which is where they have traded for the majority of my twenty-eight years in this business.  It is possible that 2014 could be a year of consolidation.  We are using an earnings range in 2014 for the S&P 500 of $117-121 and a mid-point of $118.75.  Our price cone of probability for this year is $1,900-2,100.  That is a price appreciation potential of roughly 3-6%, 5-8% roughly with dividends around our mid-point."

I see no reason to change that analysis at this time.  I do think there may possibly be a period where stocks are better to buy at some point this year but would also caution that stocks can correct sometimes by time as well as price.  Meaning that we must also accept the possibility that stocks will simply just flop around for a longer period of time and in essence not do much of anything.  That would not be a bad thing in my view as it would weed out any potential excesses lurking in the weeds.

I will be gone now until after April 1.  Some of that will be visiting clients, some is vacation time and a little bit of that involves some investment research.  I have a few things scheduled in the hopper but expect posting to be erratic until I get back.  Of course we'll break in if anything major occurs.

See you in the Spring.  At least I hope the weather's better here when I get back!!!

*Long ETFs related to the S&P 500 in client and personal accounts.