17. Fixed income volumes will increase, as there will be a cyclical movement from bonds to stocks. While this trade will not be as challenging or as difficult as we may have thought earlier in 2013 (as the QE taper has not been as traumatic as thought), it will occur, and equity inflows and fixed income outflows will be the dominant news.
DC: Yet equities will underperform 2013 results?
18. While there will continue to be pressure to create new electronic platforms, and at the end of the day we will see some competition to MarketAxess, the market will not migrate to an all-to-all limit order-style market.
DC: Someone will always be trying to build a better mousetrap.
LT: Overall, 2014 will be a better year for the industry than 2013.
DC: Based on industry statements, if we are still around it will be a better year.
LT: QE will taper, rates will rise, assets will rotate and commissions will be spent.
DC: A return to a more normal business cycle would be welcomed but I wonder if anyone can recognize “normal.”
LT: While market indices hit the moon in 2013 and we will not see that kind of reprise in 2014, there will be less anxiety in 2014.
DC: Beware: Most market experts say anxiety is what keeps markets humming along. It is when all the retail investors believe there is nothing but blue skies ahead that they get whacked!
LT: And the tradeoff of less anxiety for lower returns will be greatly appreciated throughout the industry.
DC: See above: You can’t take risk out of markets. As Warren Buffett says, “Be fearful when others are greedy and greedy when others are fearful.”
That maxim played out in 2013 and could play out in 2014 as well but with a different outcome.