2015 Outlook: The year of Equities, the US and Spain

These factors will converge so that the equities keep on rising, the US will remain the global engine versus the Eurozone and the emerging countries, and Spain will keep on growing above its counterparts, at over 1.8%.

The analysis team at the Danish Saxo Bank usually publish a report at the end of the year with their extravagant forecasts for the following year. The fact that some of these forecasts have come true shows that markets are always exposed to unexpected events, and therefore they attract volatility. Now that the S&P volatility index, the Vix, is stable at 16% (at the beginning of 2011 it even went beyond 30%), these experts forecast a new default by Russia, a 5% inflation in Japan, the devalutation of the Yuan by 20%, and even the disappearance of the QE from Mr Draghi’s mind.

Until we see if these forecasts become a reality or just previsions, the US and its equities are the most likely to be the engines of the global economy for 2015. According to Miguel Ángel García, director of the Market Strategy Department at Banca March, “the previews of the global GDP are above the historical average, led by the US, where the GDP will grow at rates higher than 3% thanks to the private consumption, the investment and the recovery of the real estate sector.”

Asoka Wöhrmann, head of investment at Deutsche Asset & Wealth Management, also believes that the growth will lead the global economic cycle in 2015. Patrice Gautry, chief economist at UBS, adds that the interest rates will remain at very low levels and that the “generosity” of the repurchase of shares programs will be the ground for a good outlook for the US economy. Mr Gautry gives especial preference to the wealth and technology sectors.

The decoupling between the US and the Eurozone will remain in 2015. However, the Euro countries will avoid economic recession and deflation thanks to the expected ECB’s expansive monetary policy and the depreciation of the Euro. Furthermore, the fiscal policy will be less restrictive and there will be less energy costs.

“What we consider positive in Europe is that there will be a lower difference between the growth rates of the peripheral countries. This shows that the structural reforms of the periphery actually work,” experts at Deutsche Asset & Wealth Management say.

For its part, Banca March warns that the burden of the Eurozone will come from the structural problems of Germany, France or Italy. Investment in Germany has grown by 0.5% on average in the last three years, while in France the public deficit and the loss of competitiveness have increased. Italy doesn’t want to carry out reforms and maintains high unemployment and public debt rates.

The constrast between the US and Europe, the fall of the oil price and a low interest rates scenario remind of the situation experienced at the end of the 90s, when Germany became “the sick man of Europe” and the S&P500 was in the middle of the technological bubble.

“Despite the similarities, we think that we are not in the same situation,” Morgan Stanley experts claim. They explain: “First of all, the emerging countries have healthier balances, more flexible currencies and wide reserve currencies. The global central banks are all ready to keep on providing liquidity to the system, and the S&P is at 18x, around its historical average.”

The interest rates in Europe are extremely low, almost at 0%, and all the stock exchanges are rising. In this scenario, the equities apparently can’t do anything but increase. José Luis Herrera, Client Services Team Leader at CMC Markets, says: “equities remains in the rising trend, despite the difficulties that have happened, such as the current Russian crisis. Besides, the QE (or the expectation of a QE) directly involves liquidity, which translates into financial assets purchases. It would be weird that this didn’t happen this time.”

The low interest rates might benefit the banking secotr. Even the domestic consumption might be affected if the domestic demand is reactivated. Finally, the telecom/technology sector could be the spotlight of corporate movements and could bring some surprises in 2015.

Market watchers at Bankinter bet on a slow advance of the stock exchanges.

“Our outlook hints at potentials of revaluations close to +20% for the main indexes. However, taking into account the current high volatility due to open risks (oil, Russia, Greece…), we set our objectives for 2015 in an intermediate zone, which means waiting for revaluations close to +15%.”

From Interdin, director of analysis and strategy Antonio Zamora says that the Ibex will be one of the European indexes with the best performance

“if Spain continues leading Europe” (although it is still low regarding other indexes such as the DAX). Analysts at Banca March forecast a 1.8% GDP advance in Spain, driven by the domestic demand. For the second year in a row, Spain will grow above the EZ average. However, Miguel Ángel García also warns: “the indebtedness of the Spaniards has kept on increasing and was 2.8 times the GDP at the end of the 2Q14,” not to mention risks such as the unemployment or a fall in exports.

About the Author

Julia Pastor
Julia Pastor has broad experience in business writing for Consejeros Media Group at Consejeros, Consenso del Mercado and The Corner. Previously, she worked for the financial news agency GBA and contributed to El País Business. She holds a Master's in Financial Journalism and a degree in English from the Complutense University in Madrid.

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