Stocks rally on!
Stocks will rally in the coming year, but expect some major volatility. Lots of folks disagree, but I think that the 10-year Treasury yield will not be easily tamed, and it will rise above 3.5 percent as the Fed removes some stimulus. I think 4 percent could be on the horizon. That will make stocks skittish but if the economy is improving, as we hope, the bumps will give way to year-end gains. They won’t be the dazzling gains of 2013, but maybe the SP 500 will eke out a high-single-digit move.
The Fed’s efforts to assure markets it will keep short-end rates at zero for a long time actually works. The yield curve steepens, and by year-end, if everything is clicking, the market starts to look for a rate hike in 2015.
OK, this has GOT to be the year. Let’s hope we see growth accelerate because if it doesn’t, I fear a dip. By the end of the year, we should see some heartier gains and an economy growing at 3 percent plus.
China to the rescue?
The odds are 50-50 that China restarts its growth engine in a meaningful way and boosts the world and regional economy. The new leadership needs to show it is making economic strides, as it flexes its military muscle in the region, and that could be motivation to get the economy humming.
The U.S. oil and gas boom is in full swing, and it will continue to affect energy producers around the world. OPEC, with more barrels of its own coming on line, struggles to keep control of prices. Here’s a wild thought: the U.S. actually starts to embrace its rising position of power and the political implications of being less dependent on other sources. The Keystone pipeline gets approved, and WTI crude stays in a range under $110 per barrel.
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Congress commonly waits until late in the year to extend expiring tax provisions like these, as well as others not mentioned above, such as the exemption for charitable IRA distributions, deductions for mortgage insurance premiums, and the higher immediate write-off amounts for small-business equipment purchases.
Lawmakers often use what’s known as a tax-extenders bill to pass all the extensions in a single package. Earlier this month, WOTC Coalition President Paul Suplizio said that a seemingly unrelated Medicare-payments bill was probably the first step toward a year-end tax extenders bill that would cover expiring tax breaks like these.
And, just as millions of Americans procrastinate until April 15 to file their taxes, we can expect lawmakers to wait until Dec. 31 — or beyond — to decide the fate of these tax breaks.