Nobody knows what’s going to happen in the markets next year. If anyone tells you they have some inside information on where the market is headed, it’s best to run far away from that person.
That said, there are patterns of behavior that give us some clues to things that are likely to happen in 2013. We’re not telling you that the following things are going to happen next year — but don’t be at all surprised if they do.
1. The market will go up early in the year, sag back starting at some point in the spring, then rise again in the fall.
That’s what it did this year, when the S&P 500 index increased by 11 percent through April Fool’s Day, then dropped 10 percent through the first of June. From there till the end of the year, the S&P has been up about 11 percent. We saw the same rough pattern in 2011: By May 1, the S&P 500 was up a solid 8.2 percent on the year, but by the beginning of October, the index had fallen nearly 20 percent from where it had stood on May 1.
2. The effects of the fiscal cliff will be short-lived.
We’re likely to go over it for at least a brief time, but Congress will pass some sort of fix before too long. The dirty little secret of the GOP’s corporate wing is that they don’t want the scheduled government cuts — particularly the reductions in defense spending, which are slated to amount to about $500 billion — any more than the Democrats do. Enough of the Republican-controlled House will be willing to team up with the Dems in order to get something passed.
4. Facebook won’t.
Facebook’s P/E, by contrast, is 139.53. Investors seem to have realized that just because a company is used by billions of people, that doesn’t mean it’s going to bring in billions of dollars. There hasn’t been a highflying Internet stock yet that has fully recovered from its initial deflating.
6. Stock funds will start to take in more money.
Domestic equity funds have been draining money for years now, with an estimated total of around $100 billion in net outflows suffered in 2012 alone. That can’t last forever, and it’s likely to turn around very soon. There’s too much money being made in American stocks for investors to continue to shy away.
And one bonus prophecy: