As 2013 draws to a close, you may be wondering what to expect in the year ahead, and how to prepare your portfolio accordingly. A new piece, BlackRock’s 2014 Outlook—The List: What to Know, What to Do is here to help you.
In this 2014 outlook piece, Jeffrey Rosenberg, Peter Hayes and I have put together a list of five “what to know” (or expect) items and five “what to do” investing ideas, all designed to help you navigate the markets in 2014.
So what are the five things you should know for 2014? The short answer is to expect more of the same. Many of the conditions of the last few years — including slow growth, low interest rates and very low inflation— are likely to persist. Drilling down into our list, here are the five things to know:
1.) The Economy: Growing, Albeit Slowly. While expect a modest improvement in growth next year, for the first time in a while, there’s as good a chance of growth surprising to the upside as there is of growth surprising to the downside. We expect U.S. economic growth to improve slightly to around 2.5% next year from 2%, supported by the Federal Reserve (Fed)’s easy-money policies, stronger household balance sheets, a healing housing market and lower energy prices. That said, a weak labor market and Washington dysfunction pose headwinds to growth.
2.) Interest Rates: Higher, But Not Through the Roof. Modestly higher growth should lead to slightly higher interest rates, with the 10-year Treasury modestly climbing around 0.5% next year.
3.) Inflation: The Risk is to the Downside. Inflation remains close to historic lows and we don’t see that changing in 2014.
4.) Employment: Jobs Are Growing, But Wages are Not. While the unemployment rate is likely to drop next year, U.S. wage growth is likely to remain subdued given long-term demographic, technology and global labor trends.
5.) More Policy Uncertainty Means More Volatility. Volatility is likely to increase if – or when – political dysfunction again emerges.