Just Follow the Easy Money and Forget Everything Else?

Easy Money and Forget EverythingThis has clearly been the year of the bull, as the bears enter their fifth year of hibernation during what has been a spectacular bull market run. For those who have constantly called for the stock market to burn up, it hasn’t happened.

The stock market clearly has its eyes on higher ground as we move into the final few weeks of the year. The advance has been much stronger than what I had initially expected back in January.

At that time, I thought the stock market would move higher, driven by the technology and financial stocks. My assessment was correct, but the size of the upside moves have been much bigger than I had imagined. The biggest surprise has been the ability of the stock market to hold and avoid any major correction. Bulls have fended off the majority of the bear uprising this year, with the biggest stock market correction being about six percent in the S&P 500.

S&P 500 Large Cap Index Chart

Chart courtesy of www.StockCharts.com

Now, as the S&P 500 and DOW move back toward their record highs, my view is that the stock market will likely move higher, driven by jobs creation and decent confidence levels.

Of course, with the jobs creation will come tapering by the Federal Reserve; but as long as the economy strengthens and jobs are created, investors should be happy.

Investors are also continuing to hold onto their bullish sentiment. In the weekly AAII Investor Sentiment Survey for the week ended December 4, 42.6% of individual investors surveyed were bullish on the stock market for the next six months, down 4.7% from the previous week. (Source: American Association of Individual Investors web site, last accessed December 10, 2013.) In the survey, 27.5% were bearish and 29.8% were neutral, which was a 5.4% rise from the previous week.

I’m not at all surprised with the findings, as investors generally don’t want to miss out on any additional gains in the stock market as we move into 2014, which will likely be another good year for stocks; albeit, I doubt it will surpass the advance we will see this year.

While I will be offering my view towards 2014 early in the New Year, I feel the investment climate of easy money, economic renewal, and jobs growth will help support stocks heading into 2014. So feel free to ride the current stock market gains; but at the same time, you should make sure you take some profits off the table and have some capital available for buying, just in case the stock market shows some temporary weakness, which could be a buying opportunity.