As we move into the back end of the year and set ourselves up for the festive season. It is always interesting to plan and build into the New Year.
Equally, it provides a natural point to take a step back and review. Each year, we publish our Outrageous Market Predictions for the following year
(you can pre-order your free copy here).
2013 has been an incredible year – with markets putting on good weight – at this point in time around 20% and stocks like CBA and Telstra enjoying more than 40%.
So why then is 2014 going to be a make or break year for traders?
We believe the great divide – that between those in the market making money. And those that aren’t will grow wider than ever, presenting a massive barrier to entry for the new comer.
The reason why is that in the New Year, the market is likely to be even higher, with the price of stocks more expensive. And for those that haven’t been making profits this year. They are coming in without the cushion of profits to reinvest. Psychologically, this can make it far a more tricky decision to start.
By contrast, those that have been in the market throughout this year, and have enjoyed profits, that money has to go somewhere and the most logical place is of course, straight back into the market, to continue to enjoy more of the same!
The drivers for the Australian share market’s run remain in place – and are likely to be continued supporting factors for the year ahead.
Low Interest Rates
Low interest rates, effectively forcing investors to search for better than interest returns outside of the cash market. This year, that has meant investing for yield and providing strong demand for the higher yield stocks. These typically include the Banking sector and of course Telstra – appealing not only for their dividends, but also the fully franked nature of that dividend – a must for anyone with Self Managed Super.
Dividends
Building on the dividend theme, I saw some research last week, suggesting more than $17bn in dividends had been paid out this year. Of this, $3bn went into dividend re-investment plans (where instead of receiving cash, you elect to take the dividend in the form of shares) while the balance of cash is unlikely to be sitting in the bank for long, as those investors redeploy that, back in the market. Afterall, why wouldn’t you??
Confidence
As a result, those with confidence, results, dividends, and profits are far more comfortable getting the sleeves rolled up and doing more of the same, while those that are hanging back. Thinking about when they should get in, will find it harder and harder, as the market pushes higher.
Buy High?
I remember a client some years ago being reluctant to jump into a stock, because the price on the chart was near the top of his monitor, and therefore had very little room to move higher!! True story – but that aside, prices have been driven higher by one major factor – that of buyers driving the market North. With SMSF money also flowing into the market, what is your outlook for 2014? Lower rates, a renewed optimism with a majority government in Canberra and the case becomes even stronger.
Action Takers
Markets, like life, reward action takers. Gaining the confidence to take that first step can often be a challenge. For many it is a difficult decision. But for sure, that after that first step is taken, momentum will kick in and keep you going. Never was a better truism created than the quote “a journey of a thousand miles begins with the first step” the rest is simply momentum.
Need some help taking that first step? Then click here and let us help you.
