Portfolio Compass

Compass Changes:

* Downgraded agriculture commodities to neutral from neutral/positive.

* Decreased duration view to short/intermediate from intermediate.

Investment Takeaways:

 * Our 2014 stock market forecast calls for gains of 10 – 15%, based on our forecast for 5 – 10% earnings growth and modest price-to-earnings (PE) multiple expansion.

 * We favor small caps and cyclical sectors, as we expect U.S. economic growth to improve over 2014.

 * Valuations and technicals drove our recent emerging markets (EM) upgrade to neutral.

 * We are taking a more defensive stance against interest rate risk given bond market strength in 2014. Higher valuations are still evident across the bond market, and a below-benchmark bond weighting may be appropriate.

 * High-yield bond valuations suggest caution, but we still find higher yielding, fundamentally sound segments of the bond market such as high-yield bonds, bank loans, and preferred securities attractive.

 * Our lowered agriculture commodities view reflects deteriorating technicals.

 * From a technical perspective, we view the S&P 500 Index closing at new all-time highs as a bullish signal that indicates potential upside.

 

Portfolio Compass

 

Jason A. Jennings, CFP®

Managing Partner

6 W. 2nd St.

Frederick, MD 21701

240.215.4709 office

240.439.4475 fax

www.keyfinancialgrp.com

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The CERTIFIED FINANCIAL PLANNER™, CFP® are professional certification marks granted in the United States by Certified Financial Planner Board of Standards, Inc. (“CFP Board”).