2014 Market Recap & What's in Store for 2015?
By Eliseo "Jojo" Prisno, CRPC, MS
Chartered Retirement Planning Counselor
Happy New Year to everyone and let's look forward to a more prosperous one. What's in store for us for this new year? Let me share an article from Peter C. Kenney (one of Yahoo Finance's contributors and writer of Kenny's Commentary; by the way I like the insights of this guy and I never miss reading all his market commentaries and outlooks). Peter shared to us his perspective of what the themes for 2015 will be. What's quite interesting is that he summarized the market's prognosis for the year including our economy as a whole. This outlook will at least give us guidance on what to expect over the next 12 months and where it will potentially conclude.
Here's Peter's article:
"Themes that will drive markets in 2015 - year end targets"
"Over the past several weeks I have been privileged to be included in several prominent quarterly investment outlooks. I have also been asked to put together some of my projections both thematically and numerically for next year. As a result, I have put together some of those thoughts here in Kenny's Commentary as we head into year end.
What I expect for 2015 –
Stronger dollar fueled by continued US economic outperformance
*Depressed energy prices and as a result tame inflationary pressures in the economy
*Continued low interest rates for at least the first 2 quarters.
*Second two quarters will be dominated by a rising interest rate paradigm.
*At least one pullback or correction of 10% or more during 2015
*Shift in rates will sponsor equity market volatility and possible correction if coupled with an additional geo-political risk-off theme. However, trend will regain traction higher.
*Lower unemployment rates – potentially breaking below 5%
*Shrinking Federal Reserve balance sheet
*Shrinking Federal budget deficit as a percentage of GDP
*Long awaited return of first time home buyers
Out performance by large cap over small caps due to relatively reasonable valuations, moderating risk appetite on the part of investors, a rising rate environment and less excess liquidity in the system.
2015 Year-end targets:
S&P 500: 2275
10-year Treasury yield: 2.65
Crude oil (WTI) $52.00/ barrel – with a great deal of intra-year volatility
Fed Funds rate 1.15
GDP + 3.4%
The Biggest risk facing equity markets right now?
The disruption being fueled by the sharply lower oil trade and the resultant geopolitical risks. I believe we will continue to see pressure on petroleum prices until we find some equilibrium in supply/demand. That may not be until mid-second quarter. Meantime, we can be fairly certain that upward pressure on energy prices - regardless of demand as a result of an expanding world economy - is not on the horizon. Production, over supply and known reserves all will act to dampen any price appreciation in energy for some time to come. This shift in the global energy paradigm will have widespread implications both politically and economically. Oil producing states lacking broad political support will be under increasingly strident pressure to reform governments, Governments that are tied closely to oil revenue as a principle source of foreign capital and that have not effectively stratified their economic model will have to adjust spending and consumer expectations.
Is the sharp trade lower in energy prices a net positive for the economy?
Yes, net positive over the long term but low energy prices will sponsor continued volatility in the near term for equities. Lower input costs (energy) will be a major factor in spurring increased consumer confidence, consumer demand, increased production in manufacturing and increasing productivity. Positives of lower energy prices are numerous and far reaching. Lower energy prices will also act to keep inflationary pressures subdued. As a result, it will allow the Federal Reserve further extension of the time line for normalization of rates."
About the writer: Eliseo Jojo Prisno is a Chartered Retirement Planning Counselor and for over a decade has managed the wealth of select families and business owners. He founded P/E Capital Investments in 2010 and is the current Managing Director and Senior Investment Advisor of the firm. Mr. Prisno also manages a Fund of Funds Portfolio with Ameritas and runs an All Equity Growth and Income Portfolio in Separate Accounts via E-Trade Financial. If you have questions or desire a complimentary analysis of your retirement readiness, call toll free to 1-888-929-2825 or visit our page on facebook or our website: www.PEcapitalinvestments.com.