Stock Market Outlook & Prediction for 2014
Lombardi Publishing was established in 1986 as an investment newsletter providing stock market analysis to its readers. Today, we publish 26 paid-for investment letters, most of which provide stock market direction and individual stock picking analysis.
In 2001, Michael Lombardi started his famous daily economic newsletter Profit Confidential. Written by Lombardi Financial editors who have been offering stock market guidance for years to Lombardi customers, Profit Confidential provides a macro-picture on where the stock market is headed, what sectors are hot, and which sectors to avoid.
Over the years, Michael’s financial commentary and the accuracy of his economic predictions have garnered him global attention, and the confidence of over one million investors in more than 140 countries.
Michael Lombardi has been widely recognized as predicting five major economic events over the past 10 years.
1) In 2002, he famously told readers to get into gold
2) Told them to get out of the housing market in 2006
3) Predicted the recession of late 2007
4) Warned readers to get out of stocks in the fall of 2007
5) Advised readers to get back into stocks in March 2009
In 2002, Michael’s Profit Confidential famously advised readers to buy gold-related investments when gold bullion traded under $300.00 an ounce. “I’ve been pushing gold bullion and gold shares for over a year now. Back in January 2002, I personally started buying gold shares.” (As published in Profit Confidential, December 13, 2002.)
In 2006, Profit Confidential “begged” its readers to get out of the housing market years before it plunged. Michael started warnings abut the coming U.S. housing crisis right at the peak of the boom. On August 2, 2006 Michael Lombardi predicted, “I’m getting very worried about the state of the U.S. housing market and its ramifications on the economy. The U.S. could be headed for its first annual decline in home prices on record, adjusted for inflation. And, I really believe this could be a catastrophe for the U.S. economy.”
Michael was also one of the first to predict the U.S. economy would be in a recession by late 2007. On March 22, 2007, he warned, “Over the past few weeks, I’ve written about subprime lenders and how their demise will hurt the U.S. housing market, the economy, and the stock market. There’s no escaping the carnage headed our way because the housing market and subprime business are falling apart. The worst of our problems, because of the easy money made available to borrowers, which fuelled the housing boom that peaked in 2005, has yet to arrive.”
At the same time Michael wrote this, former Federal Reserve Chairman Alan Greenspan was quoted as saying, “The worst is over for the U.S. housing market, and there will be no economic spillover effects from the poor housing market.”
Michael Lombardi also warned his readers in advance of the crash in the stock market of 2008. On November 29, 2007, Michael Lombardi predicted, “The Dow Jones Industrial Average, the S&P 500, and the other major stock market indices finished yesterday with the best two-day showing since 2002. I’m looking at the market really of the past two days as a classic stock market bear trap. As the economy gets closer to contraction, 2008 will likely be a most challenging economic year for America.”
The Dow Jones peaked at 14,279 in October, 2007. A “sucker’s rally” developed in November 2007, which Michael quickly classified as a bear trap for his readers. One year later, the Dow Jones Industrial Average was at 8,726.
And, Profit Confidential turned bullish on stocks in March of 2009, and rode the bear market rally from a Dow Jones Industrial Average of 6,440 on March 9, 2009, to 12,876 on May 2, 2011, a gain of 99%.
But, Michael is not resting on his laurels from the past 10 years.
In 2013, Michael predicts the devaluation of the U.S. dollar that started in early 2009 will accelerate as the U.S. economy deteriorates, that gold prices will continue to rise, and that the euro is done. Michael also predicts that inflation will be a big, big problem for the U.S.; probably for the rest of the decade. Finally, Michael believes 2013 will be a poor year for stocks.
It’s not all doom and gloom, though. He also has ways investors can protect their holdings, and even make money off the weak economy.
It’s widely expected that at the end of this month, the Federal Reserve will end its third round of quantitative easing (that began in September of 2012). This is QE3, where the Federal Reserve was printing $85.0 billion of new money every month and using it to buy U.S. Treasuries and mortgage-backed securities (MBS). In the beginning of 2014, the Fed started reducing the amount of money it was printing each month.
Is there another round of quantitative easing (more commonly known as QE) coming?
Here’s why I ask…
First, U.S. long-term bond yields are collapsing. Back in 2013, when the Federal Reserve hinted that it might move away from quantitative easing, we saw U.S. bond yields soar. Between May and December of 2013, yields on the U.S. 10-year notes almost doubled. But since then the unexpected happened.
Chart courtesy of www.StockCharts.com
Since the beginning of 2014, the yields on the same bonds have plunged 30%. Despite the Federal Reserve telling us it expects to raise interest rates in 2015 and 2016 (which would be catastrophic for bonds), bond prices are rising… Odd, to say the least.
Second, I hear hints about QE4 from key members of the Federal Reserve. In an interview with Reuters, the president of the Federal Reserve Bank of San Francisco said, “If we really get a sustained, disinflationary forecast…then I think moving back to additional asset purchases in a situation like that should be something we should seriously consider.” (Source: “Exclusive: Fed’s Williams downplays global risks, eyes U.S. inflation,” Reuters, October 14, 2014.)
In other words, if inflation in the U.S. economy doesn’t meet the … Read More
Over the past few months, I warned my readers the stock market had become a risky place to be. While I also suggested euphoria could bring the market higher than most thought possible—to the point of irrationality—the bubble has now burst. Key stock indices are falling and fear among investors is rising quickly.
Please look at the chart below of the Chicago Board Options Exchange (CBOE) Volatility Index (VIX). This index is often referred to as the “fear index” for key stock indices. If this index rises, it means investors fear a market sell-off. If it declines, investors are complacent and not worried about the stock market falling.
Chart courtesy of www.StockCharts.com
In just the last 18 trading days (between September 19 and October 15), the VIX has jumped 122% and now stands at the highest level since mid-2012. It has also moved way beyond its 50-day and 200-day moving averages, which shows strength and momentum to the upside from a technical perspective.
Sadly, the VIX isn’t the only indicator telling us that investors don’t want to be in the stock market. Below you’ll find the NAAIM Exposure Index chart, a measure of equity exposure of active money managers (the so-called smart money).
Chart courtesy of www.StockCharts.com
Active money managers continue to reduce their exposure to equities as key stock indices fall. On September 2, 82% of their collective portfolios were exposed to the stock market. Now, it’s only 33%. This represents a decline of 60% in their equity market exposure.
On the fundamental front, the stock market is constrained as well. Each day, we are seeing deteriorating economic data … Read More
Now that the Dow Jones Industrial Average has fallen 1,035 points (six percent) from its mid-September peak, the question investors are asking is “how far will she go?” For small-cap investors, the drama is greater, as the Russell 2000 Index has fallen 12.5% from its July peak.
Since 2009, every market pullback presented investors with an opportunity to get back into stocks at discounted prices. Even some editors here at Lombardi Publishing Corporation see the recent pullback in stocks as an opportunity.
But what happens if it is different this time? How about if stocks just keep falling?
If you have been a long-term follower of my column, you know I have been adamant about an economic slowdown in the global economy.
And let’s face it: the American stock markets have been addicted to the easy money policies of the Federal Reserve, namely money printing and record-low interest rates. But that is all coming to an end now. The Fed will be out of the money printing business soon and it has warned us on several occasions that interest rates will need to rise.
The International Monetary Fund (IMF) is now (or should I say, is finally) warning about an economic slowdown in the global economy. In its most recent global growth forecast, the IMF said, “With weaker-than-expected global growth for the first half of 2014 and increased downside risks, the projected pickup in growth may again fail to materialize or fall short of expectation.” The IMF also said the global economy may never see the kind of expansion it experienced prior to the financial crisis. (Source: “IMF says economic … Read More
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