Crude Oil, Ruble Rubble: Charts to Keep Your Eyes On For ’15 by Frank Holmes

In anticipation of the new year ahead, I’ve pulled together 15 charts that we’ll be watching and might help guide our expectations for what 2015 has in store for us. After looking them over, be sure to share some of your own via Facebook, Twitter or Instagram.

A Not-So-Crude Trend

Crude oil has recently dipped below $50 per barrel for the first time since 2009, one of the reasons for which is the rise of oil production in the United States. The glut has already prompted many U.S. companies to halt or limit projects, especially those that make use of hydraulic fracturing, or fracking. With oil prices as low as they are, it’s possible even more companies will join them.

1.

Crude Oil

click to enlarge

The bright side, however, is that a bottom and subsequent rally might emerge as early as next month, if the 5-, 15- and 30-year trend stays in place.

2.

Crude Oil

click to enlarge

Airline Stocks Taking Off

Low oil prices have certainly hurt companies involved in the exploration and production of oil, but cheap fuel has benefited many companies that consume barrelsful of the stuff, airlines included. Despite some turbulence, such as the October pullback and pre-election Ebola scares, airline stocks have continued to ascend.

3.

Crude Oil
click to enlarge

PMI: The Economic Soothsayer

Gross domestic product (GDP) tells you where you’ve been. Only the global manufacturing purchasing manager’s index (PMI) can tell you where you’re headed. Our research shows that when the one-month PMI reading crosses above the three-month moving average, gains have been made in select areas six months afterward:

4.

Crude Oil

click to enlarge

Since September of last year, the global one-month reading has remained below the three-month moving average.

5.

Crude Oil

click to enlarge

We’ll be eyeing the global PMI closely this year because when the “cross-above” occurs, it’ll be time to act!

End of One Secular Cycle, Start of Another?

We might be nearing the end of another 30-year-or-so secular market cycle, which is both exciting and a signal for caution. Adjusted for inflation, each of the three cycles—1921-1949, 1949-1982 and 1982-2015—have risen successively in performance.

6.

Crude Oil

click to enlarge

This raises more than a few questions, two of which immediately spring to mind: When will this current cycle end? And will the next one follow the trend of even better inflation-adjusted returns?

Ruble Rubble

We all know Russia’s going through tough times. International sanctions, sliding oil prices and a collapsing currency have all contributed to dire economic straits.

7.

Crude Oil

click to enlarge

The Federation’s economy is expected to contract by almost 5 percent, and Standard & Poor’s recently announced that it could very well downgrade Russian debt to junk status within the next three months.

Whatever your opinion on Russia is, it’s important to acknowledge that ours is a global economy. It would be in our country and company’s best interest for Russia to transform itself into a more attractive place to conduct business.

BRICS of Gold

Many investors are aware that gold is often used as a safe-haven currency. We’re witnessing this fear trade unfold right now in most of the BRICS countries—Brazil, Russia, India, China and South Africa.

By year’s end, Russia had snapped up 130 tons of the precious metal, a 73-percent increase from 2013. Since India eliminated its 80:20 rule in November, which mandated that 20 percent of all imported gold must be exported before any new shipments could be brought in, gold demand has exploded. In South Africa, gold producers are currently leading a stock market rally.

And in China, wholesale gold demand has remained steady as its economy has slowed. Total withdrawals from the Shanghai Gold Exchange came in just shy of the record set in 2013.

8.

Crude Oil

click to enlarge

We’ll see if China can sustain its robust demand throughout the next 12 months.

Year of the Bull Market

Speaking of China, its A-Shares have rallied strongly since the summer despite the country’s slowdown. They continue to be undervalued and offer a favorable risk-reward profile.

9.

Crude Oil

click to enlarge

The rally in Chinese equities cannot be overstated. Over the past six months, China’s market capitalization has surpassed that of other BRIC countries combined.

10.

Crude Oil

click to enlarge

Brightest of the Bunch

Although gold had another down year in 2014, losing 1.7 percent, it still smoked all other major world currencies except for the U.S. dollar, whose mounting strength has put pressure on the yellow metal.

11.

Crude Oil

click to enlarge

With the global downturn in effect, gold appears likely to remain an attractive investment.

Borrowing for Free

Bad news is often good news for gold: For the first time ever, the German 5-year and 10-year bond yields have fallen below zero, indicating unambiguous deflation in the eurozone.

12.

Crude Oil

click to enlarge

This means that German bondholders are effectively paying the government to hold on to its debt. As a result, international investors might look elsewhere for better performance—gold, for instance, or the U.S. municipal bond market, which was valued at $3.6 trillion by year’s end.

The S&P 500 Index Paying Dividends

Nearly 85 percent of companies in the S&P 500 currently pay a dividend, with dividends per share (DPS) having grown 11.3 percent in the past 12 months.

13.

Crude Oil

click to enlarge

What’s more, FactSet analysts expect DPS to increase over 8 percent in the next 12 months, with the financial and consumer discretionary sectors to report double-digit growth.

Watch the Big Apple

As the U.S.’s largest company by net capitalization, Apple has had mixed results after launching its flagship devices. When it released the first iPhone back in June 2007, its stock surged 16 percent within the next month. More recently, however, Apple stock tumbled following reports that the iPhone 6 was prone to bending.

Will the Apple Watch, to be released sometime early this year, lead company stock higher? Or will it take a bite out of gains? We’ll have to wait and see, but for now, analysts are already making their product shipment forecasts for 2015.

14.

Crude Oil

click to enlarge

Don’t Fear Rising Rates

15.

Crude Oil

This one remains filed under “considerable time,” as we have no idea when or to what extent the Federal Reserve will decide to raise rates this year. I’ve previously written about how rate increases might affect Treasuries. But what about stocks? Historical precedent, going back to 1971, shows that stocks have on average increased by

1, 2  - View Full Page