Do U.S. Stocks Have Room to Rise?

Markets Await Fed Announcement On Stimulus
Spencer Platt/Getty Images
By Leslie Shaffer

The S&P 500 (^GPSC) may have clocked up gains of more than 27 percent this year, but some analysts believe U.S. stocks still have more room to rise.

In the wake of the Federal Reserve's decision to begin tapering its asset purchases from $85 billion a month to $75 billion, starting in January, some analysts are concerned the U.S. market may lose ground amid a potential decline in liquidity.

But others remain undeterred.

"The Fed will be supplying fewer reserves [and] will be less accommodative than it has been, but it will still be aggressively accommodative by historical standards," said Dennis Gartman, the editor and publisher of The Gartman Letter.

"They're not taking any money out of the system. They're simply putting less money into the system," he told CNBC. "The economy itself is doing very well," he noted.

In the third quarter, the U.S. economy grew 3.6 percent from a year earlier, according to data from the Commerce Department.

"It will be years before the Fed has actually begun to tighten monetary policy. And in the past it has taken tightening to inspire a recession; it has taken tightening and an inverted yield curve to have a deleterious impact," he said. "I'll be very simplistic and say the trend [for stocks] is going from the lower left to the upper right."

Others also expect further gains in U.S. stocks.

"I do think equities are still going to move forward," Lorraine Tan, director of equity research at S&P Capital IQ, told CNBC, citing valuations. Despite the advances so far this year, "you're not talking valuations that are so exuberant yet that you're going to have a steep fall," she said

But she noted equities may not have a straight line up. %VIRTUAL-article-sponsoredlinks%"We're still expecting some sort of pullback during the course of the year because at these levels you obviously have a little less room for errors," she said. "We're looking at about 8-10 percent upside for most equities."

To be sure, some are convinced shares have risen enough.

"What's kept up the market is liquidity. It's not the economy," said Uwe Parpart, managing director at Reorient Financial Markets.

"I don't see the real economy picking up even as the Fed is beginning to withdraw accommodation," he told CNBC. While third quarter economic growth appeared strong, nearly half of it was due to inventory buildup, while real wages have been declining, he said.

Inventories in the third quarter rose to $116.5 billion, the largest increase since 1998, and accounting for 1.68 percentage points of the rise in gross domestic product in the quarter.

"I'm not saying the U.S. market is going to collapse. I'm just saying it's not going to outperform the way it did this year because what has driven this year's outperformance has been massive increases in liquidity," Parpart said. "2014 will see significant decreases in the actual liquidity creation."

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Do U.S. Stocks Have Room to Rise?

This is my personal favorite! Think of yourself as a regular monthly bill you have to pay. All you have to do is arrange to have a set amount of money directly deposited from your paycheck into a savings account each month.

I recommend using a separate savings account because if you have access to your funds in your checking account, you're more likely to spend them. Again, it might hurt a bit at first to take home a little less every month, but trust me, after a while you won't even notice it's gone. Here's a moment when the "set it and forget it" strategy works wonders.

It feels great to be rewarded for your hard work. And it feels even better to spend that hard-earned bonus on something you’ll enjoy, like a trip to France or an iPad. At the same time, the pleasure of a vacation or new gadget is short-lived compared to financial security.

So make a pact with yourself to put every bonus you get from here on out to good use. If you direct 90 percent of your bonuses straight into your savings account as a rule, you’ll still have 10 percent to treat yourself with (plus the comfort of knowing that you're building a well-earned safety net). I live by this rule.

OK, OK, this seems like an obvious one -- and easier said than done. Actually, most people spend money on more unnecessary items than they think. So take time to look at where your money is going in detail and begin to cut back. Saving $10 here and there could help you put a lot away in the long run.
Many banks offer seasonal accounts meant to save for holidays like Christmas. These accounts give you reduced access to your accounts, charging a hefty penalty each time you withdraw more than permitted. Since emergencies don't occur often, a seasonal account could make sure you're touching it only when needed (just make sure you're not tempted to blow it all on Christmas gifts).
I love this one. Chalk it up to my massive craving for organization, but I'm all about getting rid of things I no longer use. Rather than throwing these unused goods away, start selling them, and put that money into your emergency fund. All you need to do is post them to a site like eBay or Craigslist or Amazon and you can get rid of items from the comfort of your home. You can also take your clothes to a consignment shop to have them sold for you.
Instead of saving your pennies, put aside any $5 bills that come your way. Never spend a $5 bill again, and you'll be surprised by how quickly this silly trick will help you come up with a few hundred dollars to add to an emergency fund.
You could pick up odd jobs via websites like,,, or
If you get a cash-back reward for any spending on your credit card, just make it a rule that those dollars will be dedicated to your freedom fund. It may only add up to $100 extra each year, depending on your spending, but every little bit counts.
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