The recent shift in stock market leadership has one technician drawing comparisons to a prefinancial crisis market.» Read More
Commodities were not exactly the place to be in 2013. While the S&P 500 rose nearly 30 percent, the S&P GSCI Commodity Index dropped 3.5 percent. But in 2014, some investors are playing for that trade to turn around.
"I do think there are some reasons why you could be somewhat optimistic about the possibilities for commodities in 2014," said James Paulsen, of Wells Capital Management, who expects the asset class to outperform stocks and bonds in 2014.
"First of all, they got crushed over the last year and a half, and we kind of revalued the commodity market. So I think there's good value here for the first time."
On Tuesday's episode of "Futures Now," Paulsen said that his positive expectations for economic growth undergird his bullish commodity stance.
"The biggest problem commodities have had over the past year and a half or so is that there's been spotty growth in the world—contraction in Europe and Japan, a slowdown in the emerging world, a slug here in the United States at 2 percent," Paulsen said.
"You look now and that's a very different environment. We have the most synchronized global growth outlook here going into 2014 that we've ever had. There's positive and accelerating growth nearly everywhere. I can't help but think that's good for commodity demand."
What makes Paulsen's thesis so interesting is that his take on the global economy is fairly the opposite view of that held by many commodity bulls.
Gina Martin Adams of Wells Fargo was Wall Street's biggest bear in 2013, predicting that the S&P 500 would close the year at 1,440 even as the market skyrocketed. In 2014, she once again has the most bearish target on the Street, predicting that the S&P will close out the year at 1,850—pretty much exactly where the index finished 2013.
But that doesn't mean she expects the stock market to just stay put over the coming months.
"You can easily make the case for stocks to jump 300 points this year, as well as to fall 300 points this year," Adams said on Tuesday's episode of "Futures Now." "I think the story this year will be one of greater volatility, simply because we are in this environment of chance in monetary policy, and it can go in either direction."
Adams, institutional equity strategist at Wells Fargo, says her call for 2013 was hamstrung by a misreading of the Federal Reserve.
"We had anticipated that by the second half of 2013, the Fed would start to incrementally remove, or at least taper back on, some of their quantitative easing programs," Adams granted. "So what we missed for the most part was that the Fed kept the party going all the way through the end of 2013, contrary to our expectations."
For 2014, "the way we back into our 1,850 price target is by saying that this Fed is going to be very, very hesitant and kind of keep the reins the best they can on financial market activity," so while the market multiple will contract as it typically does when the Fed makes policy more restrictive, "we're going to have a below-average contraction in the multiple," Adams said.
At the same time, inflated expectations could prove the market's Achilles' heel.
"In 2013, everyone was suggesting that growth would be kind of stagnant, and that set us up for a period of time in which growth could exceed expectations. I think the opposite is the case this year," Adams said. "Growth probably will incrementally improve in 2014. At this point, we seem to have priced in much better growth expectations, and that's the risk."
Gold futures plunged more than $30 at 10:14 a.m. EST on Monday morning, before regaining nearly all of that drop within the same minute.
The swift move triggered a 10-second pause in trading, and many market participants said a single trading error was probably to blame.
"What has a tendency to happen if someone does a fat finger trade is that it triggers stops that people leave in," said Matthew Hoverman, senior trader at Grafite Capital. "There is a high likelihood that that's what happened today."
Investors are likely to remember 2013 not only as a banner year for the stocks—but also as a miserable one for gold. With a nearly 30 percent slide, the yellow metal not only suffered its first annual loss since 2000, but its worst year since 1981.
Yet some strategists are contending that the secular bull market for gold remains intact. And in fact, for those who remain wary about the Federal Reserve's quantitative easing program, gold looks far preferable to stocks for 2014.
In gold, we've recently seen "more of a cyclical rather than a secular bear market," said Peter Boockvar on Tuesday's "Futures Now." "It's been up 12 years in a row—it certainly was due for a big pullback."
The outlook for next year will depend on the Fed, the chief market analyst at Lindsey Group went on to argue.
"The gold trade from here could be a question of faith in the Fed or no faith in the Fed," Boockvar said. "Right now, faith in the Fed is very high, as evidenced by the rise in stocks. But I don't have faith in the Fed."
In December, the Fed began to taper down its quantitative easing program, by reducing its monthly asset purchases from $85 billion to $75 billion. The stock market actually rallied on the news, but gold capped an already terrible year by dropping another $30 since that announcement.
Yet to those like Boockvar, who believe the Fed cannot unwind the program without stoking inflation, that drop actually provides a buying opportunity.
"I don't think the Fed can pull this off. I I think the exit is going to be extremely messy. Therefore, in my opinion, gold is a place to hide throughout that quote-unquote 'messiness,' " Boockvar said.
Meanwhile, Boockvar says that QE has been a "crutch" for stocks, adding that "the big crutch in 2013 potentially is not going to be there in 2014."
Like any other asset, crude oil trades on supply as well as demand. And while an improving U.S. economy can be expected to boost the demand for oil, a stronger supply picture should take any wind out of oil's sales in 2014.
"Although the U.S. economic growth story might make it seem as though rising petroleum demand should lift prices, the uptrend in U.S. crude oil production is likely to be the dominant fundamental factor for the oil market in 2014," Tim Evans, energy futures specialist at Citi Futures, wrote to CNBC.com. "Four-week average U.S. crude oil production is running some 1.2 million barrels per day, or 18 percent higher than a year ago—more than enough to outpace demand."
"This is a commodity that's priced off of logistics," said Stephen Schork, the editor of the Schork Report. "We know that North America is awash in oil," he said, making the most important question how easily it can be moved to market.
Consequently, Schork will be closely watching progress on the Keystone Pipeline system (which he said is starting to resemble a "Frankenstein pipeline"), as well as on the proposal to build a pipeline carrying oil from Alberta, Calgary, to Kitimat, British Columbia.
The 10-year Treasury yield touched 3.0 percent on Thursday for the first time since September. And while that didn't prove particularly hazardous to the stock market, Jeff Kilburg of KKM Financial says equities will be watching yields very carefully from here on out.
"It's all about the manner we move," Kilburg said on Thursday's episode of "Futures Now." "Three percent to 3.25, that's not a big deal. But if we get there in a week or two weeks, that ferocious manner will really make people rethink their equity portfolio and their equity allocations."
(Read more: On tap for next year: Legit economic growth?)
The real test will come when the 10-year yield hits the next round number.
"If we see 4 percent on the 10-year yield in the first quarter of 2014, crawl into that bomb shelter, because that will crush every market out there," Kilburg said.
Dennis Gartman says the single best trade for 2014 will be one that worked big-time in 2013: shorting the Japanese yen.
"Continuing to be short of yen against the English-speaking currencies—selling yen against sterling, selling yen against the U.S. dollar, selling yen against the Canadian dollar—I think that's going to be the great trade" of 2014, Gartman said Thursday on CNBC's "Futures Now."
Shorting the yen against the U.S. dollar has been a hugely winning trade in 2013, as the dollar has risen a massive 21 percent against the yen this year as the Bank of Japan tries to spur inflation after a long, painful deflationary period.
Stocks may have sailed higher on the Federal Reserve's tapering announcement, but David Robin of Newedge warns that the structure of the tapering timeline means that if economic data continues to improve, the market will run into a serious problem.
"If we get a surprise piece of data, if all of a sudden in February we've got the unemployment rate at 6.6 percent and three or more consecutive 200-plus nonfarm payrolls numbers, I think all bets are off," Robin said on Thursday's "Futures Now." "I think that the Fed has opened the door to exaggerated reactions due to data dependency."
(Read more: Wits beat out speed in S&P's post-taper surge)
In its statement Wednesday, the Federal Open Market Committee said that the Fed would reduce its monthly asset purchases by $10 billion, to $75 billion.
The FOMC also made it clear that economic data will determine the pace at which that amount is cut to zero, saying that it "will closely monitor incoming information on economic and financial developments in coming months."
Asset purchases are not on a preset course, it said, "and the Committee's decisions about their pace will remain contingent on the Committee's outlook for the labor market and inflation."
(Read more: Full text of Fed statement)
Sometimes speed alone doesn't cut it.
When the Fed announced Wednesday that it would begin to taper its asset purchases, stocks momentarily fell before surging back, with the S&P finishing up 1.7 percent.
When the Federal Reserve announces its next move on Wednesday, some expect it to reduce its $85 billion monthly bond-buying program, targeting an eventual end to quantitative easing in late 2014. Others expect the Fed to begin to reduce the program in early 2014, or to finish it off by 2015. But Marc Faber has a different take altogether .
"The Fed will never end QE for good," the editor and publisher of the Gloom, Boom & Doom report said Tuesday on CNBC's "Futures Now." "They will continue because these programs, once they're introduced, usually keep on going."
The Fed will announce its decision at 2 p.m. EST on Wednesday, and Fed Chairman Ben Bernanke will follow that up with a 2:30 p.m. news conference. Expectations for the meeting are mixed, but more that 50 percent of Wall Streeters expect the Fed to taper its QE program in either December or January, according to the CNBC Fed Survey. As economic data have improved, many investors are guessing that the Fed no longer considers QE to be as vital as before.
(Read more: Fed taper expected sooner: CNBC survey)
But Faber said the good times cannot last.
"The economic recovery, or so-called recovery, by June of next year, will be in the fifth year of the recovery," Faber said. "So at some stage the economy will weaken again, and at that point, the Fed will argue, 'Well, we haven't done enough, we have to do more.'"
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