The Ski Slope Market: What’s Next in 2014?
Skiing — or snowboarding, in my case — is a lot like investing in the stock market: a bumpy ride. Snow, wind, ice, and moguls are common for seasoned skiers, and interest rate fluctuations, commodity price spikes, geopolitical turmoil, and -10 percent corrections are ordinary occurrences for veteran equity investors. However, in 2013, stock investors enjoyed pristine conditions, resulting in the best year for the Dow Jones Industrial Average since 1996. Individuals owning stocks witnessed their portfolios smoothly race to sunny, powder-like returns. More specifically, a December Santa Claus rally (S&P +2.4 percent for the month) capped off a spectacular year, which resulted in the S&P 500 Index soaring +30 percent, the Nasdaq Composite Index +38 percent, and the Dow +26 percent.
Despite the meteoric move in stocks this year, many observers missed the excitement of the equity ski slopes in exchange for lounging in the comfort of the deceivingly risky but warm lodge. In the lodge, these stock-frightened individuals sipped hot cocoa with wads of inflation-losing cash, bonds, and gold. As a result, these perceived safe assets have now become symbolic relics of the 2008-2009 financial crisis. In the short run, the risk-averse coziness of the lodge may feel wonderful, but before the lounging observers can say “bull market,” the overpriced cocoas and holiday drinks will eat holes through retirement wallets and purses.