Let’s talk about expectations. Specifically, let’s talk about expectations for the Keanu Reeves-led 47 Ronin. The troubled film–and that’s the word just about everyone uses to describe it–cost at least $150 million to make, and well before its release date Universal Studios knew it would be a stinker. But here’s the thing: 47 Ronin has made $11 million in its first two days of release and could end up making $50 million at the U.S. box office. No, that won’t begin to cover its costs, but again, it’s all about expectations. If the movie is what the critics say it is, $50 million might not be a bad haul.
Now consider the U.S. stock market. The Dow Jones Industrial Average rose 1.6% to 16,378.41 this week, and narrowly missed closing at a 51st new all-time high this year after it fell 0.01% today. Likewise, the S&P 500 gained 1.3% to 1,841.40, and it too missed its 45th record high by just 0.03%.
But as the year ends, it’s time to think about expectations, as in what will the next year bring. And just as what came before could color how 47 Ronin is perceived, its likely that investors will let the Dow Jones Industrial Average’s 26% gain and the S&P 500′s 29% rise, color their outlook–for the better or for the worse.
Don’t. Let the folks at Birinyi Associates explain:
Our research has also concluded that the market works on its own, not calendar, cycle. We postulate that the markets of 1982, 1990 and 2009 have four stages and that this is the exuberant phase. Perhaps our biggest surprise this year has been that we have still not reached the point in the fourth phase where the optimists triumph. At the risk of being considered an annual projection we would recommend that investors at least consider the possibility of another outstanding year.
Given that the market does not adhere to the Gregorian calendar, we have adopted the practice of forecasting (and investing) in documentable stages or steps…Analyzing the trend of the S&P, the top of its current trading range is 1,870 which we would consider as a possible target. While we will fine-tune this after all of 2013's results and data have been posted, we are comfortable, confident and most assuredly positive.
Citigroup’s Tobias Levkovich frets about a first-quarter selloff:
We continue to think that a 1Q14 correction (in the 5%-10% range) is possible given weakening EPS forward guidance trends…not to mention euphoric sentiment levels. While credit conditions remain favorable in the US, disappointment in emerging economies and a lackluster though improving Europe could hold back the earnings story. Admittedly, better hiring intentions are encouraging, plus stock buyback activity has stepped up and money has begun to flow into equity funds.
Investors, however, are showing no signs of letting up on the risk taking. Want evidence? Just look at the top-performing stocks this week. Four of the top-five come from the materials sector, which could benefit from a stronger economy. Cliffs Natural Resources (CLF), which rose 9.6% this week, Allegheny Technologies (ATI), which gained 7.7%, U.S. Steel (X), which advanced 7.7%, and Dow-exile Alcoa (AA), which finished the week up 7.6% They were joined by PulteGroup (PHM), which rose 7.8% after a delay of a Fannie Mae and Freddie Mac mortgage-fee hike was mooted.
Like I said, expectations.
No comments:
Post a Comment