How prepared are you to make effective investments in 2014? By being aware of the most important trends for the year, you can increase your odds of being a successful investor. Some investment trends for 2014 were in the making for some time while others have only emerged recently. Still others aren’t sure things but should be kept in mind. Familiarize yourself with the most important 2014 investment trends to arm yourself with the information you need to be a savvy and successful investor.
Will Bonds Make a Comeback?
Stimulus and bond buying by the Fed had a very negative impact on bonds. The Fed is tapering off this activity, though, and the taper has already helped bonds bounce back to a certain degree. While the Fed was engaging in those activities, bond prices skyrocketed to near-record highs. At the same time, yields plummeted until they became downright paltry. With news of the taper, many bonds have already seen their yields improved and prices become more reasonable. For instance, the 10-year Treasury yield has nearly doubled. However, most bonds continue to have very low yields. The question will be whether it’s worth it to pay newer, lower prices for bonds that still don’t yield very much.
Banks are Up
Bank investments are up and should stay that way due to expectations of a steepening yield curve. The banking sector in the United States started outperforming the market in general and is expected to do so even more over the upcoming months. This is primarily happening due to faster, earlier reductions in securities buying by the Fed. As far as how long this particular trend will last, improved home sales and improved GDP figures suggest it won’t for very long. Still, the going is good right now, and the smartest investors will act accordingly.
Another Rally Unlikely for Equities
As exciting as the big rally in equities has been, all things must come to an end. Could another rally happen? Absolutely. Is it guaranteed to do so? Not at all. In fact, chances are that it’s not in the cards for 2014. This activity has already led some investors to believe that the market is overvalued. If more investors start to feel this way, equities are even less likely to rally again. If your portfolio is currently pretty heavy with equities, you should rebalance it to reflect this changing landscape.
Natural Gas Boom to Continue
The explosion in obtaining natural gas from shale will continue in 2014, and this activity will continue to keep oil and gas prices in check. This phenomenon has helps to keep airlines up, and that’s expected to stay the same this year as well. There is no indication that the shale boom will end anytime soon.
Hot Sectors May Lose Steam
If you’ve been relying heavily on hot sectors like financials, industrials and healthcare, it’s time to reevaluate things. It’s certainly possible that these sectors will continue to perform well in 2014. It’s just as likely – in fact, it’s probably even more likely – that they will lose some steam over the course of the next year. As with anything else concerning investing, it’s crucial to keep diversifying. Just because a strategy worked one year doesn’t mean it will continue to during the next. Take a look at the hot sectors you’ve invested in and be practical. Find out what you can about how they’re expected to perform in 2014. What you learn may surprise you.
Federal Reserve Speakers will Continue to Affect Market
It seems like whenever someone from the Federal Reserve gives a speech, the market reacts. That’s not an illusion. When Charles Plosser of the Philadelphia Fed noted that the Fed needs to be ready for a quickly tightening campaign, for instance, the Dow lost 50 points. Bernanke’s last speech impacted the market as well. Keep your ears peeled for news about Federal Reserve speakers. You can be sure that whenever one of them takes the podium, the market will respond in some way.
While it’s interesting to learn about potential investment trends for 2014, the most important thing to keep in mind is that anything can happen. Trends that seem like sure things now could fizzle out and be replaced by new, different trends at any time. The most successful investors don’t base their movements on one thing in particular, and they don’t blindly follow investment trends. Simply keep this information in mind to make the most educated and strategic decisions possible in 2014.