shared from CNBC - Bob Pisani |
My 2014 Predictions: Try not to be boring! It’s that time of year…prediction time. For the last week, I’ve chatted with my trader friends, asking what might happen in 2014.
For the most part, the answers were pretty bland: Federal Reserve taper continues in early 2014. 10-year bond yields go to four percent or so mid-year. Stocks falter, but then recover as the economy improves.
It’s not that I think none of the above will happen…indeed, it is the most likely course of events. It’s just that it’s so…dull.
So let’s throw caution to the wind and try to be a little more creative. My conviction level is not high on all of these, but at least it’s a little better than “Fed tapers.” Here goes:
First, forget the Goldilocks recovery. The Fed will INCREASE its bond-buying program next year after its initial attempt at tapering falters. After the Fed cut its bond-buying program to $85 billion a month from $75 billion and then again to $65 billion in early 2014, the stock market drops 10 percent and the economy begins to sputter. New Fed Chairman Janet Yellen has almost no honeymoon as she must confront the prospects that the economy may slip into another recession. The Fed reverses its earlier decision and moves to increase QE, eventually to $100 billion a month.
Second, Dallas Fed President Richard Fisher, who has become a member of the Federal Open Market Committee (FOMC) in 2014, resigns from his post mid-year, saying that the Fed is acting irresponsibly by refusing to accelerate the tapering of its bond-buying program.
Third, Microsoft buys Yahoo! at a 30 percent premium and names Marissa Mayeras its new CEO. This is a different world from 2008, when Microsoft made an unsolicited–and unsuccessful–bid for Yahoo! Microsoft stock has hit a 13-year high on hopes the company will appoint a “Wow!” candidate to replace Stephen Balmer. It’s unlikely that it will be Alan Mulally. Other candidates that have been bandied about appear to be little-known insiders. That is unlikely to satisfy investors. The company needs someone who can change the Microsoft culture. It needs someone who is a tech leader that is focused on the consumer.
Finally, here’s a look at what I thought would happen in 2013, published way back in December 2012:
- Slow growth in the U.S.: Zero to two percent GDP in 2013. The big story of 2013 will be: We are negotiating the beginning of American austerity…RIGHT.
- Despite slow growth, autos and housing will continue to be bright spots for the U.S. economy…RIGHT.
- The “big trade” in bonds and stocks will finally reverse…RIGHT: First year in five there has been inflows into stock funds.
- Massive QE continues in Japan: Yen down, Japan stocks up…RIGHT.
- Wall Street will continue to suffer from poor returns, layoffs, lower volumes, and lower pay…RIGHT, so right the NYSE sold itself to an electronic trading platform