My 2015 Stock Market Projections
BROAD MARKET
The world market has 2 models for 2015.
I believe 2015 will be setting up for another and the final bull year in equities. We are entering a period where the real economy (main street) which lagged the paper economy for many years has finally caught up and GDP has hit levels that very few analysts projected many years ago. This action is similar to 1999.
We are at cross roads in the market because the GDP is starting to make the US the best house in a bad neighborhood. Europe is currently doing very poorly while the US has continued to outpace all developed nations.
What this tells me is that over time more money will flow back into the US because investors from abroad want to keep their money appreciating over time in the best economy that has the best output and performance.
Now let’s look at the S&P below:
The S&P is telling us the rotation of stimulus is affecting every single asset price in the US economy. Every single dollar has a little bit of stimulus attached to the unit level.
Now let’s look at Europe 5 year history:
Global Stimulus across borders has created a higher valuation environments where P/Es are massively expanded. The rich has gotten richer.
So where are we headed?
We can easily continue the rise higher because the real economy is running nicely. I see we head higher next year to S&P (2250-2350) area. The bull market is entering its 7th year and generally markets parabolic when they stretch beyond expectations. The main reason I think we can actually keep moving up beyond most consensus estimates is oil is a form of stimulus. The latest collapse in oil has added a big boost to the US economy.
Now if oil prices stay low for a long period of time this may continue to help all companies across the board especially Airlines to continue their pace higher. The S&P may continue to ramp to maybe (2400-2500) area in 2015.
Low oil is great for most sectors because oil is a TAX on the economy. The rich saudis are not needed anymore.
Another factor that can help propel prices higher is near zero interest rates will not affect the market. Even if they raise rates for a a while it still won’t have a negative affect on equities until interest rates go beyond 4-5%. We are currently at zero and it may take a while to get to 4-5% because you have a relaxed fed. This move from 0 to 5 may take 2 years thus giving a good chance equities continue their ramp into 2015. Low interest rates for Houses, Autos, Businesses and so forth won’t feel the pinch of higher interest rates as long as the real economy keeps moving.
Most people forget so easily and adjust very quickly to a changing environment. The main reason for this is people don’t like to be left out in the cold.
The dangers I see for 2015
A. Euro-zone Crises with the stimulus
B. Shale out junk bond collapse
C. China Housing Collapse
D. Russia war with US
Euro zone crises:
Euro zone has started to print more money to stimulate their slowing economy and some economists think that it may backfire and drag us down during some time next year because inflation will begin to creep up. The MCX could drop down to 12,000
So what I see in the markets next 6 months out?
Market Forcast 1 for 2015:
I see a correction early next year down to S&P 1800 level. After this correction we ramp and head to the 2300-2500 possible targets.
A few head winds exist such as a few Shale companies go bankrupt and the Junk bond market crashes that will bring this market down into correction mode first half of 2015. Another problem could be the Euro Zone stimulus program back fires and brings down all markets due to fear. Finally the china housing bubble could pop around this time.
Market Forcast 2 for 2015:
The low oil prices could continue to force stimulus asset prices and the market continues its ramp higher into first half of 2015. The bad news hit sometime in march and the market begins to collapse due to fear. Tax time in the US is around that time as well.
Then either a few Shale companies go bankrupt and the Junk bond market crashes that will bring this market down into correction mode first half of 2015 or the Euro Zone stimulus program back fires and brings down all markets due to fear. Finally it could be the china housing bubble popping around this time.How will 2015 end?I think that 2015 will end up and we will shrug off all the bad news from Europe or Oil Junk bonds by the end of the year.Why? The government is keeping a close eye on bubbles. Bubbles have been the biggest killer of a market in the past 15 years. The stock bubble of 1999. The housing bubble of 2007. and the junk bubble of 2014? I don’t think so.
Government oversight has gotten intense and its hard for bubbles to bring down the market.
Where are the bubbles?
It’s harder than ever for a bubble to exist. High capital levels, stress tests and vigilant watch dogs keep eyes on these dangerous nuances of the capital markets.
1) I see a bubble in Venture capital funding for tech Start-ups. Most of these companies have no real earnings and are valued at insane levels. They are two many tourist angel investors who do not want to miss out on the next big thing. Companies like UBER, Google, Linked IN etc.
2) The next bubble I see is in Junk bonds. I hear around 30% of new junk bonds are shale oil related. This can be very dangerous if all these companies go bankrupt.
3) Biotech stocks. This sector has always been bloated with insane valuations for intangible assets. I still can’t clearly understand why the valuations are so highly priced for biotech companies. Janet Yellen agrees as well.
We should be fine in 2015 only geopolitical risks are on the table
See the original article here –
My 2015 Stock Market Projections
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