Credit: As we head into the back half of the last month of the year, the S&P 500 has risen 8%. While that is, in fact, almost perfectly in line with the average return over the last 150 years, it feels (and is) anemic compared to the 26% the index rose in 2013 and spectacular compared to the 45% to 55% plunges of which we have seen two in just the last fifteen years. So, how will 2015 be different?
The most important difference is that investors have every reason to expect stock market returns in 2015 that are closer to 2013's 26% than they are to 2014's 8%. That's not to say that all the changes from 2014 to 2015 will be positive, but for long term investors, the horizon is conspicuously free of clouds. Even as of today, stock prices would look absolutely reasonable if they were 10% higher.
To understand why, we need to first look at 2013. Why, in 2013, did the stock market rise so far and fast, while gold fell so far? In fact, 2013 was the year that economic confidence finally returned to the US. All the usual indicators of prosperity, or at least of moving in the right direction, were there, and the doomsday scenarios of inflationists were beginning to seem increasingly far-fetched.
All these indicators are now moving in the right direction again, at least as far as the stock market is concerned. Let's begin with the most obvious…
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This article was originally published on MarketIntelligenceCenter.com
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
