As we transition into 2014, investors and analysts are left wondering how the stock market will perform over the next 12 months following a strong 2013. While there is no way of knowing which direction the market will head or to what extent, one analyst has delivered a very positive forecast for the year ahead.
J.P. Morgan's Thomas Lee, chief US equity investment strategist, believes that "there's a one-in-three-chance we're (the S&P 500 Index (SNPINDEX: ^GSPC ) up 30% (in 2014)," citing examples of past "classic" bull markets. As the current bull market enters its sixth year, Lee believes that investor sentiment is the primary driver of prices and should continue to push them higher over the course of 2014.
Given the strong positive correlation between the United States' S&P index and Australia's S&P/ASX 200 (Index: ^AXJO) over the last 12 months, this is likely to indirectly boost Australian equities. The benchmark index finished up over 15% last year, closing at 5352.2 points on Tuesday – just 1.9% below its five-year high.
Investors choosing to wait for prices to come down before buying stocks should remind themselves of the gains that have been made over the last few years. Those who chose to wait on the sidelines for cheaper entry points have missed out on a 34% increase since June 2012, not to mention the dividends that have been paid by some of Australia's largest corporations.
Foolish takeaway
Instead of waiting for prices to drop, investors should find strong companies that are trading at discounted prices and hold onto them for the long-term – thus taking advantage of their growth opportunities as well as any dividends paid. Companies such as Collection House (ASX: CLH), Coca-Cola Amatil (ASX: CCL), NIB Holdings (ASX: NHF) or Telstra (ASX: TLS) are perfect places for investors to start.
Find out why Telstra is still such a fantastic opportunity
