Predictions For 2014: Signs Of Inflation Ahead?

Of all the holidays that we celebrate this time of year, New Year's has quickly become my favorite. Particularly for a professional investment manager, it’s the one time of year that we get to pause and catch our breath. New Years is a great time of year to look back at the year that was and look forward to the year ahead. Earlier this week I took a look at some of my calls from past years, and below is a list of some predictions for the year ahead.

A quick caveat on forecasting in general:  Obviously no one knows the future, but there is still value to forecasting. Just like in life, you can’t avoid the fact that things are going to happen that you didn’t expect, but you can and should have a plan, and above all it’s crucial that you are able to adapt when you’re thrown a curve-ball. A good forecast starts with the fundamental acceptance that reality will most definitely be different than forecast. Because of this, I usually prefer to think about the future in terms of likelihoods, but for the fun of the post, I’m making some declarative statements here. In general, I tried to focus on things that I think have a better likelihood of happening than markets are currently reflecting.

Sure things:

On average 144 million Americans (give or take a million) will go to work each work day
Most will gain knowledge that will make them better at their job in December than they were in January
They’ll get paid wages for their work
They’ll spend those wages on some combination of shelter, food, entertainment and savings
Babies will be born, the population will grow
The weather will be variable
People will be really optimistic at some points and really nervous at other points

Stepping out on a limb:

Macro:

We’ll start to see signs of inflation for the first time in five years
The yield curve will flatten
The Fed will be viewed as acting too timidly
The economic cycle will crest, along with share prices
Democrats will win control of congress

Business/Stock Trends:

Financials:

The banking system will finally put the ghosts of 2008 to rest
There will be consolidation among small and mid cap banks

Consumer:

Consumers will continue to focus on quality of life
That means eating healthier, building relationships and taking time for leisure
Unfortunately for capitalists it doesn’t mean spending more
Millenials will get engaged, Baby Boomers will retire, and Gen X will whine that nobody cares about them (jk, love you guys)

Technology:

Apple will release an iPhone with a bigger screen
Google will be notified by the Justice Department that it is being investigated for antitrust
More consumers will cut their cable subscriptions
More advertising dollars will be spent online
The PC market will stabilize

Healthcare:

Health insurance companies will pretend to have a tough year adjusting to Obamacare
But the transition will be smooth for healthcare providers
There will start to be a realization that genetic testing is crossing the chasm toward mass market relevance

Energy/Materials:

The shale oil boom will begin to slow output growth leading to higher oil prices
Farmers will plant less corn and unfavorable growing conditions will lead to higher food prices
Mining will stabilize but be far from prosperous

Pop culture:

The Lakers will play better without Kobe Bryant than with him
Tiger Woods will win a major championship
Google searches for “Rules of Curling Sport” will spike in February
There will be a billion dollar Mega Millions jackpot
Miley Cyrus will start to crack
An album with a fresh new sound to define the decade will be released
Edward Snowden will be extradited to the United States
Kate Middleton will become pregnant with a second royal baby

Disclaimer: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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