10 Calls For 2014: Markets, Economy, Politics

NEW YORK (TheStreet) -- For the past several years, I've somewhat begrudgingly published a year-end prediction column, first for the Street's Realmoney.com, and now for TheStreet.com. I am the first to admit that I don't exactly like writing these types of pieces, yet find myself compelled to do so. Take all of these prognostications with a grain of salt. It's tough enough to predict next week, let alone next year.

I'll be happy if even half of the following predictions come true. Even Ted Williams never hit more than a .406 batting average during a full season, and that was in 1941.

The Markets

  1. It should be a big year in the broad US markets for 2014. None of these typical 4% to 6% growth predictions that you hear from many prognosticators after a huge run-up or big decline. I see a 15% to 20% change in the S&P 500 in 2014. What I'm not sure about is whether that will be up or down. A volatile year, either up or down -- that's the best I can predict.

  2. Interest rates will rise during the year, with the 10-year note ending in excess of 4%. There's only so much the Federal Reserve can do to hold rates down, and they've done it all. The taper has already started and rates are ticking up. After years of Fed "funny money," rates should rise more.

  3. Restaurant stocks will have a rough go of it in 2014. Of course, I said that last year and struck out. The valuations have gotten out of whack, though. A group of 39 restaurant stocks I follow is trading at about 36 times trailing earnings, and more than four times book value. This group was up 57% last year, and has averaged 46% for the past five years. Wendy's (WEN), which I owned previously, has come a long way. But it is not worth 30 times 2014 consensus estimates. Darden (DRI) may be interesting as a special situation. That will be especially true if activists' calls for it to break into pieces -- including forming a REIT from the company's vast real estate holdings -- come to fruition.

    WEN ChartWEN data by YCharts

  4. Precious metals will rebound in 2013, as will mining stocks. Inflation is far from dead, no matter what some talking heads are saying. Sooner or later, it will rear its ugly head. In some areas it already has. Gold and silver are still good hedges against both inflation and uncertainty. We'll have plenty of both in our future


  1. The current presumption by nearly everyone is that Hillary Clinton is a lock for the 2016 Democratic nomination for President. Too many people are too certain about this. I believe that it won't happen, and we'll begin to see signs of that in 2014. When everyone and their brother is certain about something that is more than two years away -- especially in politics -- don't believe it.

  2. The 2014 midterm elections will be a bloodbath, as incumbent Democrats try to distance themselves from the Affordable Care Act and its continuing fallout. Republicans should pick up seats in the house and take ownership of the Senate, sending Harry Reid to an early retirement as Senate majority leader.

The Economy

  1. I remain skeptical about the so-called economic recovery. Unemployment will not improve much in 2014, and I don't mean the headline number that is currently 7%. Rather, I'm looking at the labor-force participation rate, which is now at 35-year lows. Don't be fooled either by the recent 4.1% GDP number we received for Q3.


  1. The Eagles finally win a Super Bowl, a dream kept alive by Sunday's exciting win over the Cowboys. Those of you who are laughing at that one will really like the next one.

  2. Fifty-one-year-old pitcher Jamie Moyer, who has never officially retired, gives major league baseball one last comeback attempt in 2014. He will become the oldest pitcher to get a major league win, breaking his own record set in 2012 when he was 49. The last we heard, Moyer was working on a knuckleball. (When I told my teenage son about these year-end sports predictions, he said, "Dad, those aren't predictions, they are hopes!")

The Affordable Care Act

  1. The website may be working better now. But that's the least of my worries with this debacle. We will continue to hear stories like that of my parents' neighbor, whose private coverage was cancelled. A new ACA policy meant that the neighbor's doctor was out of network. So a bypass surgery scheduled for next week won't happen, despite a 90% blockage. Get used to these kinds of stories. Ultimately, with the employer mandate scheduled to go into effect on January 1, 2015, the ACA will unravel. It is an election year, and as more are affected by this trainwreck, the public will revolt. You can't keep your doctor (period); you can't keep your current insurance (period).

That's it for 2013. Have a safe and prosperous 2014.

At the time of publication, the author had no position in any of the securities mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Jonathan Heller, CFA,CFP® is president of KEJ Financial Advisors, his fee-only financial planning company. Jon spent 17 years at Bloomberg Financial Markets in various roles, from 1989 until 2005. He ran Bloomberg's Equity Fundamental Research Department from 1994 until 1998, when he assumed responsibility for Bloomberg's Equity Data Research Department. In 2001, he joined Bloomberg's Publishing group as senior markets editor and writer for Bloomberg Personal Finance Magazine, and an associate editor and contributor for Bloomberg Markets Magazine. In 2005, he joined SEI Investments as director of investment communications within SEI's Investment Management Unit.

  Jon is also the founder of the Cheap Stocks Web site, a site dedicated to deep-value investing. He has an undergraduate degree from Grove City College and an MBA from Rider University, where he has also served on the adjunct faculty; he is also a CFA charter holder.

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