Hot markets for 2013

New year; same old problems

Last year proved to be another rough one for markets as geopolitical factors kept traders on their toes. In addition to a continuation of the sovereign debt problems that have plagued Europe for the last couple of years, we saw the Federal Reserve expand its quantitative easing programs as growth in the United States remained anemic at best.

With 2013 upon us, we asked analysts to look ahead and discern which markets they saw as having potential to outperform in the New Year. As it turns out, to look ahead requires a brief look back because most analysts see a continuation of 2012’s problems into next year.

According to Joseph Trevisani, FX analyst at World Wide Markets, most markets are trading in a risk-on/risk-off world primarily because of central bank actions. “The traditional trend drivers are pretty much moribund until the central banks end their zero interest rate policy. It’s become the universal panacea that doesn’t make anything actually better,” he says. “That’s what we’re still going to be trading on in 2013.”

In its December Federal Open Markets Committee (FOMC) meeting, the Federal Reserve adjusted its parameters for changing interest rates by attaching unemployment and inflation targets as policy objectives whereas previously the promise of low interest rates was linked to a time horizon. In the press conference following the meeting, Federal Reserve Chairman Ben Bernanke explained the change saying, “We think it’s a better form of communication. The date-based guidance served a purpose, but that was a nontransparent process.”

That change in policy should give traders greater insight into when the Fed may adjust interest rates. “If we get better than expected economic growth or numbers, that will be bad for the markets because it could indicate the Fed will begin to pare back its quantitative easing,” says Keith Springer, president of Springer Financial Advisors. “My belief is that it is going to be worse because they wouldn’t have just expanded QE if they saw good things on the horizon.”

Given the forecast for 2013, Springer is bullish precious metals and dividend stocks. His top play for 2013 is to buy gold. “Continued printing by the Fed should push gold higher. I could see gold at $2,000 an ounce sometime next year,” he says.

As to dividend stocks, Springer is looked at preferred shares over Master Limited Partnerships (MLPs). “Those types of stocks will do better in a down market. We’re expecting a bear market next year,” he says. “We’ve already had four years of a bull market in the face of economic stimulus and bed economic growth. We are due for a recession.”

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