Cautious Optimism on Wall Street for 2014

With the CBOE Volatility Index down and major Wall Street indexes all up on the final trading day of 2013, investors are looking forward to 2014 with an air of cautious optimism. The Dow Jones industrial average climbed 26.5 percent in 2013, being its best annual performance since 1995, while the Standard & Poor’s 500 rose 29.6 percent over the past 12 months, its best performance since 1997. The Nasdaq composite index registered its best performance since 2009 with an increase of 38.3 percent. Moreover, the so-called “fear index” the VIX, fell 23.9 percent over the year, being its largest annual drop since 2009 and seen as a strong indication of improved investor sentiment.

The possibility of the Fed withdrawing its stimulus measures appeared to take a back seat as investors were spurred on by the better-than-expected consumer confidence statistics, although trading volumes remained relatively light ahead of the New Year holiday on Wednesday. More than 60 percent of NYSE traded stocks ended the day higher, with 55 percent of Nasdaq traded shares ending the day higher.

Deals in the offing include the reported bid by Fiat to gain full control of Chrysler for the sum of $4.35 billion, which will put an end to the company’s proposed IPO. Fiat is set to pay the United Auto Workers health-care trust $3.65 billion for its stake in Chrysler. The UAW was awarded the 41.5 percent stake in the 2009 bankruptcy of Chrysler. It is anticipated that the deal will be concluded by January 20, ending the dispute over the value of the American automaker’s shares. In a written statement, CEO Sergio Marchionne noted that the deal would result in a “unified ownership structure” which would, among other things, offer all employees a “challenging and rewarding environment”.

According to some analysts, 2014 is likely to see increased M&A activity as companies work toward sustainable growth to substantiate share prices and players in certain sectors vie for top positions. It seems likely that the focus, for a while at least, will be on cable television companies in 2014, as Charter Communications is said to be considering making an offer for Time Warner Cable, with Comcast likely to make a spoiler bid.