Executive Edge

History says stocks can keep doing well in 2014

Jeff Brown, Special to CNBC.com

Recapping the day's news and newsmakers through the lens of CNBC.


Past performance is no guarantee of future results, as investors have been told over and over. Still, it would be silly not to at least consider lessons from history, and past patterns suggest the odds favor good stock-market gains in 2014.

There have been 17 years since 1950 when the S&P 500 finished up more than 20 percent. In 14 of those occasions, or 82 percent, stocks racked up further gains the following year. In 12 of those 14 occasions, the S&P gained at least 7 percent. The average year-after gain was 11.27 percent, and the median 12.78 percent.

Those figures pale next to the S&P's 28 percent gain so far this year, but returns like that would be pretty good given that in recent years many experts have warned that stock gains might average in the low- to mid-single digits for years to come.

Don't believe the retail gloom


We don't have a final tally on holiday sales, because, for one thing, the important post-Christmas discount period is still going on. But so far it doesn't look like the most dire predictions for this season have some to pass. Those were based, in part, on consumers' gloomy mood and the unusually short period between Thanksgiving and Christmas.

Between Nov. 1 and Dec. 24, sales rose 2.3 percent over the year-earlier period, according to MasterCard Advisors' SpendingPulse. That compares with a meager 0.7 percent gain last year. Another study showed online sales up 16.5 percent over last year.


"It was actually a Merry Christmas for retailers."—Sarah Quinlan, senior vice president at MasterCard Advisors

PE stands for 'private etiquette'


You've heard of private equity, of course, but how about "private etiquette?" According to a lawsuit against a number of PE firms, the term describes a collusion in which firms agreed not to bid against one another as public companies were taken private.

The suit targets some big-name firms like Blackstone, Bain Capital, KKR, Carlyle Group and Goldman Sachs, and could cost the defendants upwards of $1 billion, according to the New York Post. The suit involves eight buyouts worth about $100 billion, and the defendants have been resisting a settlement.


"I think there was a time the plaintiffs would have settled for $1 billion, but that time has passed."—NY Post source

Charged twice


Owning a plug-in car might make you the coolest kid on the block, but expect to pay a premium—twice.

Most car owners know that the various types of electric cars, from hybrids to pure electrics, sell for more than the same or similar model with a gasoline-only engine. But now it looks like the plug-ins depreciate faster as well.

A study done for USA Today by Kelley Blue Book shows, for instance, that the best-selling pure-electric, the Nissan Leaf, will hold on to just 15 percent of it's original value after five years. A similar Nissan Sentra SL compact would retain 36 percent of its value. Residual values of the Ford Focus Electric and Chevy Spark EV are also likely to fall short of their all-gas counterparts. Plug-in hybrids, which have gasoline backup engines, do much better.

The study doesn't suggest there's really anything wrong with the all-electrics, just that used-car buyers take awhile to get comfortable with new technologies.


"We expect to see a similar adoption curve for used EVs as we have for new EVs, and we are just now reaching the point where there are used EVs on the market."—Erik Gottfried, director of marketing for Nissan Leaf

Pros: investors should look overseas too


Where are the best bets for stocks in 2014? Well, the U.S. still looks promising, but perhaps European stocks have more room to rise. At least that's the view of one expert, Ed Keon, a managing director at Quantitative Management Associates. It's not that he doesn't like the U.S., where his economic forecast is for a very healthy 5 percent growth next year. It's just that European stocks look a little cheaper on a risk-adjusted basis. Some other experts agree that an improving economic picture globally makes non-U.S. equities appealing.


"We have been moving money toward Europe. We still have a very big position in the United States, but early in the year I thought the U.S. was basically a no-brainer."— Keon

"The relative outperformance of the U.S. markets versus others, that gap probably closes a little bit. Meaning you're going to have to look around the globe into different asset classes in order to get that big relative outperformance."—Steve Sachs, the head of capital markets at ProShares Advisors

By Jeff Brown, Special to CNBC.com