Special: Market Outlook 2014 in Brief

We are currently in a stagnant period. Stock prices seem a bit on the high side and the uncertainty discourages market participants from taking risk. As such, we see that markets tend to either creep higher on low volume or, maintain status quo on relatively low volume. There is nothing fundamentally wrong in the market at the moment so, the market is trading more “technically” rather than fundamentally.  
 
Moving forward, H1 2014 may be a good time. Bernanke is stepping down on Jan 31 so he is unlikely to rock the boat for now. Yellen taking over seems to be a “politically correct” person and so we can expect stimulus to continue as it has been expected. The only limit to stimulus, in my opinion, is the debt limit. This is not expected to be changed in the next 6 months as suggested by a Bloomberg report today. Therefore, the probability of any sweeping measures in the near term is relatively low.  
 
In Asia, China’s growth is slowing down as expected so we do not see the negative effects of it badly affecting the stock market. Abenomics has been having short-term positive inflationary effects in Japan. Comparing stock prices, there is still a chance that there may be a geographical shift in asset allocation favouring Asia in the coming months.  
My only concern now is Europe. It has been too quiet at that end and it is a big “?” if anything negative may come from there to expand our downside risk.  
 
So what does this mean for investors/traders?  
The current market situation favours position traders. Scalpers may get frustrated by the uncertain swings. Position traders can look forward to taking mid-term positions of a few weeks to a few months on this pull-back. Markets are seasonally boring at this time of the year. Prices on certain stocks can be attractive to hold into Jan and Feb. I am not pin-pointing any sector or counter at the moment because a general upswing will benefit everyone.  
 
H2 2014 is still very uncertain at this point in time. Therefore, it is important not to look beyond what we cannot reasonably forecast.