Thanks for the all the comments in 2014.
As tweeted at the beginning of 2014 (http://www.2centview.com/2014/01/02/happy-2014-from-2centview-2014/) central bank policies are designed to create real jobs – jobs will not be created unless companies must see real growth – this has certainly happened in the US where unemployment has fallen below the target 6% and gdp growth last reported at 5%!
This has sent the US Indices to records as the majority of companies continue to beat earnings expectations.
As growth begins to accelerate, interest rates are expected to rise as growth is normally accompanied by inflation – but this did not happen – instead of the 10Y US government yield rising to 3% as many predicted it yields kept falling…For some time this created a paradox – the bond market was saying inflation was not a problem – in fact deflation was a bigger problem than inflation – hence growth cannot be possible – but the stock market was saying the opposite? Which market was right?
From the US Perspective, it turned out they both were – what we have seen is amazing drop in oil prices and commodity prices staying low. Oil prices have dropped due to oversupply (fracking, more efficient cars/jets, need to for countries like Venezuela and Iran to keep pumping oil, and a lack of any growth outside the US.
So this means we could have a year of growth with zero inflation – even deflation or disinflation – this could be great for stocks as costs are kept low but prices may not necessarily follow as there is strong demand as people spend their additional cash from their savings on fuel and general confidence in the job prospects.
Only once in the past 13 where there is a 5 in the year has the stock market gone down and David Tepper is making parallels with 1998=2014 and 1999=2015 – both of which saw a russian crisis followed by a great year leading to over valuation from fair valuation.
Stay Invested in stocks in 2015 – the market is not cheap anymore – so finding bargains will be difficult – so look for sells offs like EBOLA to get in!
Would recommend keeping at least 50-60% invested in the US in 2015 (2CentView had 75% in the US invested in 2014).
If you are not invested, here are some starter stocks to get your portfolio going:
Financials – should do well in rising interest environment – so hedge against interest cost rising
$Barc FV=280 vs 243 yield 2.8%
$JPM FV=72 vs 62 yield 2.5%
$GS = 215 vs 194 yield 1.25%
Or if you want exposure to Europe $DB (Deutshe Bank) F=35 vs 25 yield 3% – note:Euro could go much weaker
Social, Mobile, Cloud
No Bargains here – the last was Google at 500 – take a small position in TWTR below 40
Commodoties – with prices at all time low could be an entry point – keep to stops if they keep falling
BHP BIlliton FV=1850 px = 1390 yield = 5.9%
Anglo American FV=1550 px = 1200 yield = 4.5%
No bargains here except:
$GILD FV=115 vs 96 9.5 2015 P/E 5% 5Y implied growth!
And finally – look to get into oil stocks when oil finally bottoms out…keep an eye of PetroFac and Halliburton
Happy New Year and all the best for 2015 from the 2CentView team!
Lets hope its good and a bit less volatile!