Thursday, January 1, 2015
Stock Market: 2015 - Another Year Of The Bull?
In the long run the US stock market gains on average 7% p.a. So, stock market gains are the rule and dropping stock prices are the exception. But I believe that 2015 will be another year with over average stock growth, meaning a plus of 10% at least.
It seems that the U.S. economy entered a virtuous circle. Economic growth is accelerating (Q3 2014 plus 5%), but inflation & interest rates are still at record lows. The US job market is getting stronger, creating monthly 200,000 and more new jobs. Low jobless rates & weekly jobless claims reduce the risk of losing ones job and lift the optimism of consumers & investors.
I assume that this year companies will respond to economic growth and their expanding markets. They will lift wages more than in recent years in oder to gain manpower for their expansion. Therefore the growth of personal incomes in the US will accelerate.
Gigantic Tax Cut
The global economy will get a lot of tailwinds from cheaper commodities (post-opec). The sharp price drops for oil, industrial metals and some agricultures work like a gigantic tax cut. Companies will have lower costs, meaning more money to invest (including into a rising labor force), and consumers have more money in their wallets.
More jobs, faster rising wages and much cheaper gasoline will speed up consumer spending in the US significantly which will boost the global economy (US imports = rising European & Asian exports).
The positive macro trends (inflation, interest rates, consumer spending) and the continously rising efficiency (thanks to technological progress like Internet, other software, robotics, 3D-printing and more) will translate into higher company profits - the engine of further stock market gains.
2015 will be great! Happy New Year!