Want to know where stock and bond prices are headed in 2014?
Well, a good bet is to look no further than the oil pits in lower Manhattan, where they trade black gold with abandon and where prices have been trending significantly lower in recent years, even amid chaos in the Middle East and an economic rebound here and in Europe.
In 2013, a slide in oil prices has quietly smoothed the way for the Dow 30, which has managed to clock 50 new record highs on its way to a 26 percent gain so far this year.
True, oil prices today are higher than they were at the beginning of 2013, but on average a barrel of good ol' American crude came in at $97 a barrel in the year now passing, versus an average of $112 in 2012.
That 14 percent drop may not seem like a lot, but it kept a floor under interest rates and kept Federal Reserve Chairman Ben Bernanke from little more than tossing and turning a bit at night as he cranked out another trillion dollars (yes, that's $85 billion times 12 months) in new bond purchases to juice the economy.
Right now the outlook is for a continuation of this virtuous cycle looks auspicious. While the consensus estimate targets a $92-a-barrel price on West Texas Intermediate Crude for 2014, more aggressive observers see even lower prices.
Michael Lewis at UBS has cut his price target to $88 for 2014 — a 9 percent decline from this year's average and a number the stock and bond markets would embrace.
Of course, there are many known unknowns and unknown unknowns (to paraphrase former Defense Secretary Donald Rumsfeld) when it comes to the Middle East in 2014.
But this we do know: America's 40-year crazy quest for energy independence arrived in 2013 with little fanfare.
Not only was crude-oil production the highest since 1989, crude imports in 2013 also were running about 5 billion barrels below 2010 levels.
All signals point to America's energy renaissance continuing into 2014. Outside events may trigger a nasty spike in prices, but if not, stable and falling crude prices will keep on forming a solid backdrop to the stock market rally.
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