Investment Commentary – January 21, 2015
Dow – 17,515.23 (1/20/15 close) (-1.73% YTD)
S&P 500 – 2,022.55 (1/20/15 close) (-1.75% YTD)
10-year Treasury – 1.81% (1/20/15 close) (-16.59% YTD)
- Volatility has reemerged in 2015 with the VIX (Volatility Index – measures stock market volatility) remaining above its long term average of 20 last week as investors reacted to another steep drop in oil prices and weak global growth. Analysts think that the market will be more volatile in 2015 than the last couple of years.
- Analysts think the U.S. economy is in relatively good shape and should continue to improve. U.S. consumer health has improved steadily since the depths of the great recession in 2008-2009. Importantly, job gains have been strong lately with 280,000 new jobs per month added in the latest 3 month period. And, the unemployment rate has improved to 5.6% continuing its trend toward a more normalized 5-5.5% level down from 6.7% a year ago and a peak of 10% in 2009. Lastly, measures of household debt service to income have fallen to the lowest level in the last 30 years while consumer net worth has improved significantly due to gains in the stock market.
- Outside of the U.S. and England, the global economy is struggling. Japan is in recession, Russia appears headed that way, Europe faces possible deflation, and China’s growth is slowing.
- Emerging markets, tied to the fortunes of China and the developed world as they are, continue to struggle despite better fiscal balance sheets and encouraging corporate earnings trends.
- 4th quarter earnings season began last week, with a handful of companies in the financial sector reporting. Earnings estimates have been consistently revised down from double digit year over year gains as analysts’ factor in the effects of lower oil prices and a stronger dollar. In the next 2 weeks, almost half of the S&P 500 companies will report their 4th quarter 2014 earnings, giving investors more color on the current market environment.
- Earnings growth, coupled with low average inflation and interest rates, still makes stocks look attractive.
- Analysts like large U.S. stocks
- Analysts like Technology and Healthcare sectors
The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
Disclosures:
https://www.jpmorganfunds.com/cm/Satellite?pagename=jpmfVanityWrapper&UserFriendlyURL=contentdet_module&smID=1159383786125
https://ipro.americancentury.com/en/insights-perspectives/industry-market-insight/fixed-income-macro-outlook.html
