The Future for Emerging Markets
JUN 30, 2015
The Future for Emerging Markets
The Wizard of Oz and the Case for a Later Liftoff
June 30, 2015
Moreover, the Fed has kept interest rates near 0% since 2008.
But after the June 17 FOMC meeting, just about everybody—and I mean everybody—is assuming that the Federal Reserve will raise interest rates later this year.
- The OECD has slashed its US growth forecast from 3.1% to 2% for 2015.
- Even the Federal Reserve turned more cautious, lowering its growth forecast from 3% to a range of 2.3% – 2.7% in March.
Combine equity appreciation and dividends, and you end up with a total return of 502.97% over 15 years. Not too shabby, if you ask me.
Greek Default Deals Blow to IMF
Economists point to fund’s missteps in 2010 Greek bailout plan
By Ian Talley
My Second Half Predictions - Part I
by: Bret Jensen
- Tuesday is the last day of trading in the first half of 2015. Stocks are going out with a bang as major indices had their worst day of year yesterday.
- Today we take a look ahead in a two part series on some of the likely themes for the second half of the year that investors should focus on.
- In addition, I offer some stocks and sectors that should outperform the overall market in the second half of 2015.
Given it is the last trading day of the first half of the year, it is time to look forward to the second half of 2015 and what it might bring for investors. In a two part series, I try to put down my outlook for the market over the next six months and offer up some stocks and sectors that should outperform the overall market through yearend.
No Equity Breakout In Third Quarter:
My first prediction is that the market will not move decisively higher from the historically narrow trading range it has been stuck in throughout 2015. While a pullback of five to 10% percent is a distinct possibility over the summer as I noted yesterday, I see no catalysts that would drive stocks significantly higher from here at least through the third quarter. This is the reason for my cautious tone on the market over the past few months both here and on Real Money Pro.
I believe three things need to happen before the market is free to explore higher levels. First, investors need to be reassured that equities can withstand an interest rate hike from the Federal Reserve. With our economy and jobs markets improving, I am really hoping that the Federal Reserve finally pulls the trigger and delivers its first interest rate increase since 2006. We can then quit playing this endless guessing game on when the central bank will finally signal they have confidence enough in our economic fundamentals to make this incremental move.
Hopefully, the markets can absorb this minor hike without much disruption which also would be a positive.
Second, whatever solution that is in the offing around Greece must take hold. Either Greece needs to be kicked out of the European Union or they need to fully implement labor and structural reforms that allow the country to compete and start to grow again. After five years of doing neither to any significant impact, some sort of course needs to be set and adhered to. This should prevent the back and forth intermittent crisis mode Europe and the global markets have had to sporadically endure over recent years.
(click to enlarge)
Finally, domestic growth needs to accelerate again. The economy in the first quarter was roughly flat and earnings growth from the S&P 500 was nothing to write home about. The economy seems on the mend in the second quarter. Although it appears full year GDP growth will once again come in with the same anemic 2% to 2.5% the economy has been stuck in throughout this weakest post war recovery on record; we should see ~3% GDP growth through the last three quarters of the year on average. This should bolster earnings growth and start to provide a tailwind to the market.
Housing Market Will Outperform in the 2nd half:
The housing market is looking up. Monthly pending home sales just hit their highest levels since April 2006 and existing home sales have been up for eight straight months and are up just over nine percent year to date. Strong job growth, improving consumer confidence, historically low mortgage rates and loosening credit should all help to ensure increasing activity in the months and years ahead.
This would be a much needed tailwind for the economy.
(click to enlarge)
Housing starts have ran around 1.5 million annually over the past three decades and got up north of 2 million annually during the recent housing boom. Housing starts have run under 1 million annually since the financial crisis and its aftermath until recently. With over 20 million more people in the country than before the financial crisis, there should be years of pent up demand to support higher levels of activity.
This is a major theme I have been playing in my Small Cap Gems portfolio where all seven of my housing and construction stocks were up in June even in a down month for the market. I recently published a piece in Investors Alley that details some good picks in this sector.
Financials Should Outperform For The 2nd Half:
Although we have seen some "flight to safety" action early this week that have brought down yields in both the United States and Germany thanks to Greece; the trend of interest rates is gradually up.
The ten year domestic treasury yield hit almost 2.5% last week; its high for 2015 before Greece reared up its ugly head once again. I believe once we get past this latest blip of volatility, interest rates will start to glide higher ahead of the Federal Reserve's first interest rate hike in almost a decade sometime later this year.
Rising interest rates helps net interest margins at banks and buoys investment performance at portfolios held by insurance companies. Many large insurers and major banks are going for 10-12 times forward earnings. This is a substantial discount to the overall market multiple and many of these financials pay decent dividends as well. As a result, I believe financials will continue to outperform the overall market in the second half of 2015.
Tomorrow we will look at some more macro trends that should play out in the second half of the year as well as some stocks and sectors that should benefit. Until then, Happy Hunting.
Les doy cordialmente la bienvenida a este Blog informativo con artículos, análisis y comentarios de publicaciones especializadas y especialmente seleccionadas, principalmente sobre temas económicos, financieros y políticos de actualidad, que esperamos y deseamos, sean de su máximo interés, utilidad y conveniencia.
Pensamos que solo comprendiendo cabalmente el presente, es que podemos proyectarnos acertadamente hacia el futuro.
Gonzalo Raffo de Lavalle
Las convicciones son mas peligrosos enemigos de la verdad que las mentiras.
Quien conoce su ignorancia revela la mas profunda sabiduría. Quien ignora su ignorancia vive en la mas profunda ilusión.
“There are decades when nothing happens and there are weeks when decades happen.”
Vladimir Ilyich Lenin
You only find out who is swimming naked when the tide goes out.
No soy alguien que sabe, sino alguien que busca.
Only Gold is money. Everything else is debt.
Las grandes almas tienen voluntades; las débiles tan solo deseos.
Quien no lo ha dado todo no ha dado nada.
History repeats itself, first as tragedy, second as farce.
We are travelers on a cosmic journey, stardust, swirling and dancing in the eddies and whirlpools of infinity. Life is eternal. We have stopped for a moment to encounter each other, to meet, to love, to share.This is a precious moment. It is a little parenthesis in eternity.
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