It has been an eventful year with a lot of volatility in the markets and a lot with regards to the Fed. We feel like going into 2015, fixed income and interest rates will continue to be a major topic. While no one is expecting a rate increase until possibly October or November of 2015, these are some of the details we are going over as we conclude this year and are looking ahead to 2015.
Santa Claus came last week
Santa Claus delivered great economic news to the markets last week. The US Economy continued to grow very strongly, including the best growth we have seen in 11 years. The GDP came out much higher than expected and consumer spending rose. We are also watching to see if the current lower oil prices here in the fourth quarter will actually increase consumer spending even further.
Even as the US Economic numbers are coming out strong, we are still watching closely the weakness in international markets. In Japan, industrial production and retail sales were down for the second time. This caused the Japanese cabinet to approve another stimulus. We are also watching deflation in China that could spill over into other markets. We feel as though these and other issues in the European markets will continue to be big topics as we look ahead to 2015.
This week and looking ahead to 2015
The consumer sentiment going in to the end of the year was just published and it is the best it has been in seven years. Many economists are looking forward to growth in the GDP for next year at 3.5% or higher which would be a solid market year. With the New Years holiday, we do not have a lot of economic data coming out this week. One thing we are watching this week and for 2015 are the Greek elections. There is the potential for a party change and Greece could start the beginning of the unraveling of the European Union. We are also watching the fact that Obamacare will be kicking in even deeper in 2015 and this will impact owner managed businesses.
Several times in 2014 we have used the expression, “The U.S. is the best house in a bad neighborhood”, which could also be true as we are looking ahead to 2015. International issues, labor markets, the Fed, and any unknowns, like the natural disasters we have seen in the past, will all have an impact on the year to come. The overall setup for 2015 is very good for growth in the Unites States. The question will be how long can the U.S. do it alone? The US represents more than 20% of the global economy and approximately 45 – 50% in terms of the stock markets. We play a major role all across the globe. Ironically, a lot of Europeans and Asians have more confidence in our economy and our markets than we as Americans do.
At Fi Plan Partners we are still very bullish on U.S. equities, although we are optimistically cautious. We see a modest acceleration in growth in the year ahead and it will be fueled by relatively low commodity prices, an improving labor market, rising but still low interest rates, and more supportive fiscal policy. These are just some of the factors we are watching as we look ahead to 2015.
Active management vs. passive management
This year some of the indices such as the S&P 500 or the DOW Jones Industrial Average have done really well with passive management. At Fi Plan Partners, when we look at clients’ portfolios we not only take into consideration the upside, but also the unexpected downside. We are proactively looking at how much risk we are taking in relation to the return. With the debates about interest rates and global economies as we move into 2015, you need to know that we want to get the highest return possible for our clients, but we will do it by taking the least amount of risk and looking to protect the downside. While neither forms of management have any guarantees, this is one of the biggest differences between active and passive management. One thing is for sure, we will always try very hard to be as proactive as possible for our clients.
We wish you a very Happy New Year and we thank you for believing in us!
If you have any specific questions or comments, please email me here or call me at (205) 989-3498.
Greg Powell, CIMA
Email Greg Powell here
Ashley Page, JD, MBA
Senior Vice President
Email Ashley Page here
Bobby Norman, CFP®
Email Bobby Norman here
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Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
There are no guarantees for either passive management or active management.
Stock investing involves risk including potential loss of principal. No strategy ensures success or protects against a loss.
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