The end of 2014 was wrought with uncertainty both at home and abroad, from nationwide domestic protests about race and policing, to worldwide dwindling energy prices, inflation limbo, and the Federal Reserve’s signals about interest rates. These conditions left many investors and advisors seeking answers. Many asset management firms offer projection reports to help readers navigate the multitude of investment options available to them given these unique circumstances. This month we found five exemplary forecasting commentaries that aim to address what lies ahead in 2015:
1. Invesco: Annual Economic Outlook – 2015 – Chief Economist John Greenwood provides a macroeconomic summary of conditions in the U.S., U.K., Eurozone, and Asia, with special focus given to the effects of monetary policy in Japan and the Eurorzone. The piece explains how policy tightening will elicit interest rate hikes, however longer-term effects will result in a slower economy and lowered inflation, ultimately leading to interest rate declines in the distant future. As for 2015, Greenwood predicts that domestic growth will be slow but steady.
2. Lord Abbett: Short Duration and the Fed Factor – Fixed income product specialist Stephen Hillebrecht predicts that the Federal Reserve will hike interest rates in mid-2015. However, due to low inflation and global economic turmoil, he surmises that the Fed will be modest in elevating short-term interest rates, with additional adjustments made slowly as the year progresses. This slow moving action will soften the blow, given that treasury bonds have traded at low yields since the 2008-09 financial downfall.
3. Franklin Tempelton: 2015 Investment Perspective – A roundtable of Franklin Templeton thought leaders including Dr. Mark Mobius and Matthew Moberg deliver their outlooks on the global market. This comprehensive report discusses equities, fixed income, alternatives and multi-asset markets. The firm calls attention to the implications of loosening monetary policy in major developed countries, and the attractiveness of certain emerging markets. The piece predicts that increased global divergence should be anticipated, and that comparatively, the U.S. economy can be expected to maintian it’s inclining stride.
4. Allianz: Optimism Reigns but Headwinds Remain – CIO Ben Fischer predicts that the Fed will not increase rates this year, and discusses how inflation will play out against a vulnerable global backdrop. He argues that while signs of improving U.S .economic growth are evident, these advances will simply not be significant enough for the Fed to increase rates. Furthermore, as the ECB’s QE program pans out, a global slowdown will surely dampen domestic prospects. As far as sectors, Fischer predicts that energy will have a sluggish year, while information technology and health care should prosper in a low interest rate environment.
5. BlackRock: Foresight, Circumspection, Caution – In a monthly commentary penned by a team of the firm’s strategists, BlackRock contends that stocks will outperform bonds in an increasingly volatile market. As the U.S. market flourishes (a rising dollar, and GDP growth estimated at around 2.5-3%) hurdles such as unimpressive wage growth, and potential rate hikes still pose a threat. The lingering effects in declining oil prices are difficult to predict, while geopolitical unrest in Russia and Ukraine, and Eurozone discord set the stage for a volatile 2015.