What to Expect in 2014

03/13/2014 7:01 am EST

Focus: STOCKS

Ned Riley

Founder and CEO, Riley Asset Management

Market veteran Ned Riley shares his outlook for the market in 2014 as well as for some of the recent high-flying technology stocks.

TERRY:  I'm Terry Savage from MoneyShow.com talking with Ned Riley of Riley Asset Management, formerly chief investment strategist for State Street Global Advisors. 

NED:  Right, Terry. 

TERRY:  So that's a very good point to start out, we're early in the year.  We had some terrific gains last year.  What do you see ahead for 2014? 

NED:  I think this year is going to be a little bit more difficult.  It was pretty easy last year.  We had the markets up 30% and if anybody want up at least that much money they probably are kind of wondering what they did for strategy.  2014 is going to be real hard in many respects.  First of all, the profit momentum is good this year, it's positive.  It was riding off the fourth quarter at 7% growth but it's going to be more difficult if Europe and the Far East don't kick in with growth.  I think our US companies are going to depend more on the international scene in 2014 than they do on the domestic scene. 

TERRY:  Well, that's not too exciting, right.  I mean, we had a weak January and now we've got the emerging markets having problems, currency woes all over.  The feds, you know, while they're not cutting back they're just not putting quite as much money in.  Can any of that be good for the stock market? 

NED:  Most of that is not good, but the tapering aspect for the Federal Reserve, I mean, we've expanded the balance sheet so much to $4 trillion that, you know, $800 to $1 trillion, you know, what's that to the fed?  They can reduce the balance sheet to $3 trillion and we still have a lot of liquidity, Terry.  When you start to look at things, there's a lot of cash, money market funds, and bonds, and I'm looking for the poor public to get whipsawed again where they'll be selling out bonds this year to put into the stock market.  Unfortunately there's the old repetition of selling at lows and buying at highs. 

TERRY:  So what's your net net for the stock market this year?  Are you predicting it will be an up year by the time the New Year's Eve bell rings? 

NED:  I think it will be an up year, but more modest, 8% to 10%.  I think the profits will be the primary factor behind that growth.  The expansion of price earnings ratios is not going to be great this year as it was last. 

TERRY:  Any sectors you like particularly? 

NED:  I like technology.  I still like the groups that I've liked for the last several years.  It's funny, between the old and the new, I actually still like the old tech stocks.  I like Apple, yes, they didn't have the quarter that everybody wanted them to, but it's cheap.  I still like companies like Hewlett-Packard which clearly out -

TERRY:  What about the hot and happening stuff, the Facebook and the Twitters? 

NED:  Well, I get a twitter every time I see the stocks go up.  Facebook hit a new high, that's wonderful.  Things are going just brilliantly for all three companies like Tesla, like Facebook, like Twitter.  The only problem is they're priced to perfection, and at some point someone is going to make a mistake along the line and that stock price is going to get hit quite dramatically, so -

TERRY:  Inaudible. 

NED:  Well, I'm a little apprehensive, yeah.  If I was going to sell the stock, I don't own any of the three so I was a fool not to own them, obviously, but I would do it in increments.  I wouldn't do it at all once.  I would sell -

TERRY:  It's always hard to look back and you sold everything at one point.  Better to just kind of average in and out.  Thanks for joining us.  We had Ned Riley of Riley Investment Management.  I'm Terry Savage from MoneyShow.com.

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