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The Haves and the Have Nots 


2014 US Equity Outlook 


CIO Equity US Scott Migliori’s 2014 outlook calls for moderate growth, an accommodative Fed and a stock-picker’s market, favoring areas of the economy that are insensitive to growth.
We expect moderate 2%-3% GDP¹ growth in 2014 and anticipate that the Fed² will remain highly accommodative during the year, with any tapering of asset purchases largely offset by dovish forward guidance. S&P 500 Index earnings growth should accelerate to 8%-10%, as low interest rates and declining fuel prices should serve as a powerful tailwind to consumer spending. With inflation tame, the S&P 500 price-to-earnings multiple could expand modestly from current levels, setting the stage for potentially another year of double-digit returns for US equities.

Investor sentiment, while a concern, is not yet at historic extremes marking previous tops. However, we would expect the market to continue to narrow into fewer and fewer “winners,” as the current bull market is now quite mature by historical standards. This has already become evident by the declining number of issues that have been hitting new highs over the last six months—even as the major averages have continued to move higher.

Indeed, stock-picking will be paramount in such an environment, as the degree of dispersion between the performance of the “haves” and the “have nots” is likely to widen further. We favor areas of the market that are relatively insensitive to global growth, which we expect to remain unimpressive. Such areas include technology, pharmaceuticals and biotech, and select consumer names.

¹ Gross domestic product
² US Federal Reserve

The material contains the current opinions of the author, which are subject to change without notice. Statements concerning financial market trends are based on current market conditions, which will fluctuate. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Forecasts and estimates have certain inherent limitations, and are not intended to be relied upon as advice or interpreted as a recommendation.



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