2014 Outlook: A Year of Change
The following is an excerpt from our recent research piece "2014 Outlook: A Year of Change" The full report can be found HERE.
We are calling 2014, A Year of Change. This change, albeit modest, is substantial directionally as we are finally seeing the recurring themes of the last five years dissipate. Fear has turned into increased confidence. Low interest rates have started to rise. Economic growth is expected to accelerate. European breakup talk has been replaced by discussions about an improving Europe. These changes make the investment backdrop for 2014, different from years past and perhaps even a bit more challenging.
At Pathlight, our optimistic view over the last five years had been based on our opinion that the pervasive negativity was not only misplaced, but excessive. We felt that as minor improvements materialized, investment performance would follow. It didn’t really matter if economic growth was 2% or 4%--or if job growth was 100,000 per month rather than 180,000. What mattered was the avoidance of a major negative macro event that would steel concerns of another 2008 meltdown–which fortunately didn’t happen. In 2014, that is now different. With heightened expectations, investment results will likely require more than just macro event avoidance. It will require continued improvement globally in the economy, jobs in the U.S., consistency in China, and increased stability in the Eurozone.