paul.lengemann's picture

Year-end Trading Is Winding Down; the Outlook for 2015 Is Modestly Positive

The world is going nuts as the price of oil continues to fall. The US stock market has been dropping from one low to the next for no clear reason. The dollar keeps on climbing against the euro, pound and the yen. China is struggling. Economic forecasts for most countries are showing some growth.

But, it must be kept in mind that we are at year-end and most market participants are either doing nothing to protect their profits or they are investors trying to make it through to the New Year with their hide intact.

Those who can get away with it should pack up and go on holiday until the start of 2015. Nothing of consequence will happen until then. The Fed at its upcoming FOMC meeting will do nothing, not even hint at future actions. The ECB is basically closed until after the turn of the year. And the emerging markets can’t do anything to make things better. There will be pain for some of the players and joy for others. Going nuts will help no one.

Generally, the emerging economies are doing modestly well, with the exception of some big losers. The biggest failure is Russia, followed by Brazil, Venezuela and Colombia. Their deterioration would have happened without the drop in crude prices. The decline in crude prices merely accelerated their poor performance.

What is coming in 2015? Russia will deteriorate further and feel the pain. The corporations in the emerging markets with large dollar debts will be in big trouble. The net exporters of oil will show much lower growth and the net importers will benefit. The biggest gainers will be China and India.

If the EU and Japan come out of their economic misery the rest of the world will benefit greatly. Combined with good US growth 2015 could turn out to be a winning year.