Portfolio Compass January 23, 2014


Investment Takeaways

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

ƒWe favor small caps and cyclical sectors for their potential to capture
further stock market gains amid improving economic growth.

ƒWe favor U.S. stocks relative to emerging markets (EM) and developed
foreign, as Europe struggles to grow, and growth in several key EM
countries has been uneven.

ƒFollowing a strong start for bonds in 2014, we expect yields to move
gradually higher, and out of the current range, as economic growth
improves and the Federal Reserve (Fed) removes stimulus.

ƒHigher-yielding, fundamentally sound segments of the bond market such
as high-yield bonds, bank loans, and preferred securities remain among
the more attractive fixed income options.

ƒMunicipal improvement relative to Treasuries in December may translate
to greater Treasury sensitivity over the short term.

ƒFrom a technical perspective, the S&P 500 Index is testing resistance at
1848; the next level of resistance above 1848 is at 1865.

Jason A. Jennings, CFP®
Managing Partner
6 W. 2nd St.
Frederick, MD 21701
240.215.4709 office
240.439.4475 fax
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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”).