Why I’m long the S&P 500, short bonds in 2014

By Gary HarloffCovestor

The U.S. Federal Reserve under Chairman Ben Bernanke saved the American economy from a really bad depression 5 years ago. And quantitative easing saved the financial industry from huge losses.

In my opinion, bankers take care of bankers, and the Fed saved the U.S. stock market from a bear market. Looking back on 2013, it has been a really good bullish year for investing. Thank you Santa Ben!

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According to my calculations, the S&P 500 Index (SPX) momentum briefly turned negative a few weeks ago and now has recovered. Earlier in December, just prior to the Fed announcing the beginning of lessening their support of the bond market by $10 billion per month starting in January 2014, the financial markets were shaking.

Wall Street apparently views the recently announced GDP growth of 4.1% as sufficient to keep the investment dollars flowing. In other words, GDP growth trumps bond pumping at this stage of the business cycle. I wonder if other investors, besides the Fed, will step up and buy U.S. bonds.

I am bullish on S&P 500 and (NASDAQ) indexes. I am short bonds at this time. Now that the economy is growing and workers may get wage increases, inflation will rise and so will gold prices. In my opinion, gold prices might increase by 20% in 2014.

In my opinion, semiconductors lead the sector indexes, with oil, gold, and utilities following. In global equities, I like Germany, the U.K, and the U.S. closely behind. The U.S. dollar index is slightly negative and emerging markets have negative momentum in my view.

DISCLAIMER: The investments discussed are held in client accounts as of December 31, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.

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