Not a bad day for the market, considering the nasty days that preceded it this and last week. All the major indices up strongly, the VIX down a bit, and oil, well, flat, right around $48 for WTI crude. The latter is important in that in the many analysts ascribed the aforementioned nasty days to the falling price of oil. If true, then the market adapted today.
My thinking, however, is slightly different than the consensus, but what else is new? The market’s recent fall has something to do with energy prices falling generally, but not specifically. As I pointed out at the end of December, the market would become somewhat volatile at the beginning of the year because of the uncertainty of impending Fed actions regarding interest rates.
- Fed Officials Saw Rate Rise Unlikely Before April, Minutes Show
Now, add to the Fed “issue” the recent news about Greece plotting to drop out of the Eurozone and the lackluster news regarding Europe’s economy, and you have a market more volatile than “somewhat.”
- Germany Open to Greek Debt Talks After Election, Lawmakers Say
- Euro-Area Prices Fall More Than Forecast, Pointing to Growing Risk of Deflation
Speaking of Germany, it is a truly bright spot in the European picture, much like the US is in the global economy. The economy in Deutschland is big, strong, and humming along. It is not worried so much about inflation.
- Germany can afford to be patient, unlike the rest of the Eurozone where deflation is already taking a major toll on economic activity. While Germany is enjoying almost full employment, many countries in the rest of the zone are experiencing record unemployment.
And there it is. Germany is pushing ahead, no matter what Greece, France, and any other economy in Europe is doing, and that suggests all is not lost there, right? Enter Bill Gross, the man who has been suggesting for some time now that the US equity market is dead. In fact, he has suggested the next seven years will return less-than marginal returns in the equity market.
- With global expansion still sputtering after years of interest rates near zero, investors will gradually seek alternatives to risky assets, Gross wrote today in an investment outlook for Janus Capital Group. (JNS).
According to Mr. Gross, it really does not matter what the ECB does relative to QE in Europe, which is the “other” underlying drag on the market, according to some analysts. No, even if the ECB decides to stimulate in one manner or another that will not save the global equity markets.
- Bill Gross, the former manager of the world’s largest bond fund, said prices for many assets will fall this year as record-low interest rates fail to restore sufficient economic growth.
The key word here is “former” for sure. His former fund (PIMCO) did not perform well following his advice in the last few years; hence, he is at Janus now. So, now he is giving the same advice, so let’s see where that gets him.
In the meantime, I won’t suggest the market’s big day today is the end of the up and down, but it is a start, a recapturing of some lost ground. So, as I have been writing, keep your eye out for opportunity, such as …
- After a seven-year drought, merger and acquisition activity involving real estate investment trusts is expected to rev up in 2015, according to Green Street Advisors.
This coming year will be a big one for opportunity, especially if oil remains low the US economy will keep on chugging along, and if Europe finds a way to get in line with Germany, well, we will see Mr. Gross.
Trade in the day; invest in your life …
