According to a report from the Wall Street Journal,''in year 2013, developed-economy stock markets posted double-digit-percentage gains as easy-money policies washed over concerns about growth in economies still hobbled years after the financial crisis''.
''For 2014, many investors see little on the horizon to shift attention away from monetary policy, even as hopes rise again that the U.S. economy is finally moving into a slightly higher gear''.
"In being so aggressive, monetary policy tends to swamp everything else," said Dennis Stattman, manager of the $59 billion BlackRock Global Allocation fund. Even in the U.S., where the Federal Reserve is set to trim its monthly bond purchases by $10 billion in January, "some kind of very easy money is going to be with us for a very long time."
''While much of the focus in 2013 was on the prospects for less stimulus from the Fed, as the year drew to a close more investors were keeping an eye on declining inflation rates across developed markets, especially in Europe. The lingering threat of deflation, they said, could result in monetary policy being looser than expected, fueling continued rallies in stocks and keeping bond yields relatively low''.
William Stromberg, head of equity at T. Rowe Price Group Inc., which manages $647 billion, is in the camp of those seeing more sustained good news on the economy, which should help the prospects for stocks.
The downside, said Mr. Stromberg, is that stronger growth could cause some indigestion for financial markets as the Fed responds by tightening monetary policy. The result could be a "minicorrection" for stocks, but with interest rates generally staying low, inflation low and growth stronger, "we're still in the sweet spot."
