DANVERS — Will the stock market soar to new highs in 2014?
How fast and steep will interest rates climb as the U.S. Federal Reserve tapers its money-printing and bond-buying spree known as “quantitative easing”?
And will companies begin to hire more as consumers’ spending grows?
Two local financial experts — Rob Lutts, president and chief investment officer for Cabot Money Management in Salem, and David Caruso, founding chairman and managing director of Coastal Capital Group in Danvers — say the economic forecast is good. Both say the economy should continue to improve in 2014, with signs of modest growth, but there will be challenges.
Both were scheduled to speak today at the North Shore Chamber of Commerce about the year ahead. They chatted with The Salem News in advance of the program.
Stocks are a leading indicator, Caruso said, so last year’s historic bull market indicates the economy should follow its lead. Caruso predicts 2014 will be “a good year,” as the economy continues to expand, but without the kind of exuberance or rapid expansion that could indicate a bubble about to burst.
The stock market went on a tear in 2013, with the Standard and Poor’s 500, a broad index of stocks, up nearly 30 percent, the Dow Jones industrial average performing nearly as well and the NASDAQ, which focuses on technology companies, up nearly 40 percent.
Lutts cautions, however, that “without the Federal Reserve, we would not have had this tremendous bull market.”
The Federal Reserve has injected $3 trillion into the economy, including $1 trillion into the banking system. The Federal Reserve does this by “printing” money electronically and making it available to banks to lend. For the first time, it bought U.S. Treasury bonds to keep interest rates at record lows. The central bank also bought mortgage-backed securities, a move that kept rates low and freed up money for banks to lend.