2013 has been a great year for the bulls (S&P up nearly 32% as of this post), and a lot of exciting things have happened. Needless to say, 2014 is likely to be different (in its own right) and, as traders, we are always looking forward and seeking out new opportunities.
All of the sectors were up in 2013, although we had some notable laggards (utilities). Courtesy of StockCharts.com, here is a nice visual representation of all the major sectors and their performances as we head into the final day of trading.
So, what sectors do we expect to “lead” in the new year? To be quite honest, I don’t believe in putting too much energy and effort into trying to “predict” what specific stocks/sectors will begin to lead. Rather (as a trader) I am more concerned with finding the new leaders and laggards and then exploiting them. However, it certainly helps to look at the “broader” picture.
The last item that I want you to focus on is this graphic displaying the “business cycle” and how various asset classes behave as we go through the four phases: contraction, trough, expansion, and peak. Take a look and think about where you think we are at this stage in the bull market.
As another financial blogger, Andrew Thrasher, recently pointed out, it is likely that we are in “Stage 4″ of this cycle. I would tend to agree. If this is the case, then some of the under-performers (relative to the S&P 500 this year) very well may present a ton of opportunities next year–think of energy and material stocks.
Happy New Year to all.
Good luck trading out there.