Saturday , 10 December 2016


Here’s What to Expect During the Next 6 Months

The market will continue to keep us all guessing – that’s what markets do best – but in this article I present 10 predictions for the remainder of 2015. Some are contrarian calls well outside of the mainstream but, as 2015 has trained us to expect the unexpected, I believe them to be the right calls.

The above comments, and those below, have been edited by Lorimer Wilson, editor of munKNEE.com (Your Key to Making Money!) and the FREE Intelligence Report newsletter (see sample here – register here) for the sake of clarity ([ ]) and brevity (…) to provide a fast and easy read. The contents of this post have been excerpted from an article* by Charles Lewis Sizemore (charlessizemore.com) originally entitled 10 Market Predictions for the Rest of 2015 ‏ and which can be read in its unabridged format HERE. (This paragraph must be included in any article re-posting to avoid copyright infringement.)

With no more ado, let’s jump into it.

#1. The Fed Will Raise Rates Once – and Then Stop

…The Fed really wants to raise rates. They want to give themselves room to lower rates next time we have a recession. But they don’t want to cause a recession in the process, so I expect a rate hike of no more than 0.25% to 0.50%, making this the shortest tightening cycle in history.

#2. Bond Yields Will Finish the Year Lower

This is a contrarian view, to say the least. “Everyone” expects bond yields to rise through the remainder of this year and beyond but falling yields are consistent with my view that the U.S. economy is due for a cooling.

Our current economic expansion, which has been aided by the most aggressive central bank action in history, is looking long in the tooth and never quite gathered enough speed to give us strong growth or to ignite the inflation the Fed was hoping to see.

Inflation is the single biggest worry for the bond market (rising inflation means rising bond yields … and falling bond prices) and, while the most recent 12-month consumer price inflation figures showed inflation of just 0.1% albeit a more respectable 1.8% when xcluding food and energy, that’s still below the Fed’s target of 2.0%.

We are not likely to see bond yields go much higher:

  • until we see a sustained uptick in inflation,
  • because the hunt for yield by aging Baby Boomers, which has been a theme now for over a decade, is only going to intensify,
  • lower yields in Europe and Japan will put an anchor of sorts on U.S. bond yields
  • and, finally, there is precedent. Following its spectacular bubble and bust in the early 1990s, Japanese bond yields continued to drift lower … for 20 years and counting so anyone who tells you that bond yields “can’t go lower” or “can’t stay this low for long” clearly has never bothered to read a history book.

#3. The REIT Rally Will Gather Steam

…If I’m right about bond yields falling rather than rising, then REITs (Real Estate Investment Trusts) are an absolute steal at today’s prices and, in fact, REITs have spent most of the past six weeks quietly rallying. Between now and the end of 2015, I expect REIT investors to see very nice returns between the high dividends and the potential for capital gains.

#4. Oil Will Find a Bottom

It’s a perfect storm: massive new supply is coming out of the United States and Canada at a time when demand is waning from a slowing China and years of energy efficiency gains.

The market is practically sloshing with excess crude oil but here’s the thing. Supply gluts don’t last forever, and markets tend to overreact to recent information. I don’t know at what price crude oil will eventually find its bottom – only time will tell – but low prices push less competitive producers out of business and spur new demand.

I can’t tell you the exact date and price at which crude oil will find a bottom but I expect it will be a lot sooner than most people seem to think, and I’m betting it finds that bottom between now and the end of 2015.

#5. Midstream MLPs Will Finish the Year Strongly

Midstream MLPs [by and large] are unaffected by energy prices as their revenues are determined by the volume of oil and gas passing through their pipelines and not their prices.

Once this wave of panic selling passes, expect MLPs to enjoy a massive rally throughout the remainder of 2015. Prices and yields this attractive don’t stay available forever.

#6. Apple Will Get Its Mojo Back

In the world of investing, the question always becomes “What have you done for me lately?” and, right now, Apple is a victim of its own success. Sales of the iPhone 6 and 6 Plus absolutely crushed all expectations but such a torrid pace isn’t sustainable.

[That being said,] at today’s prices, none of this matters. Despite being the largest company in the world by market cap, Apple is one of the cheapest large companies in the world. It trades at a forward P/E of just 12. Stripping out Apple’s gargantuan cash hoard, you get down to a single-digit P/E valuation … for Apple, the most profitable company in the world. I agree with Carl Icahn. Apple is worth at least $240 per share, more than double today’s price.

#7. European Stocks Will Blow American Stocks Out of the Water

While U.S. stocks are priced to deliver flattish returns over the next several years, many European markets are priced to deliver healthy returns of 7% or more.

#8. Spain’s Unemployment Rate Will Finally Dip Below 20%

Spain is quietly growing and is expected to see GDP growth of 3.3% in 2015. That should help to bring the Spanish unemployment rate of 22.4% last quarter a little closer to its historic average, since 1976, of 16.4%.

#9. Chinese Stocks Will Drift Even Lower

…The bear market in Chinese stocks is far from over because confidence has been completely undermined. No one in their right mind would buy a stock they would then be unable to sell. So, bottom line, don’t expect the bull market in Chinese stocks to resume any time in 2015. Investors burned by the selloff aren’t likely to come back for more anytime soon.

#10. Russia Will Come in From the Cold and Embrace the West – Again

OK, this last one is a joke. The Russian bear has most assuredly not grown cuddlier in recent months, and I don’t see this happening any time in 2015.

*http://charlessizemore.com/10-market-predictions-for-the-rest-of-2015/