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Top Market Ideas For 2015
Featured, Perspective | 31 December 2014
By: Tan Jia Hui
Articles (82) Profile

We know the economy for 2015 is still a toss coin approach that is largely debated right now in the market.

Commentaries on financial sites all around, too much noise.

We decided to talk to people who actually walked the talk from GIC and HSBC, who are now transferring their investment brilliance into a slick mobile application they both co-founded, called Call Levels.

Daniel, who was an Investment manager at GIC previously, and Cynthia, who was in the Equity Capital Markets previously at HSBC, shared insights about what they are looking at from Mr Market in 2015.

US Recovery, Continuing Woes For Japan And Europe
Daniel shared that it would be an exciting time ahead for investors, one reason being the recovery of the US market from the aftermath of the Great Recession.

Indeed, rosy economic indicators are painting a good picture of the US recovery. 321,000 jobs were added in November according to US’ Labour Department, representing the 10th consecutive month of net job gains above 200,000. Unemployment rate stood at 5.8 percent.

Additionally, the improving job market delivered a 0.4 percent increase in average hourly earnings for ordinary workers, double the anticipated 0.2 percent, stoking optimism about the economy.

Coupled with the recent drop in oil prices, it seems to be a double boon for US consumers and retailers ahead of the festive season. (Retail sales rose 0.7 percent in November)

On the other hand, Japan and some European economies are not faring so well.

Contrastingly, just as US is putting an end to its quantitative easing (QE) program, Japan looks set to expand its own QE and many are speculating that the Euro zone might be starting QE.

Japan is facing slow growth, big government debt, worries about deflation and a rapidly aging population, while some European economies are plagued with huge government debts and prolonged double digits unemployment rates.

The economic woes in Japan and the Euro zone might however present another opportunity for investors, according to Daniel. Investors can go bargain hunting, in search of stocks whose prices have been bettered but have their fundamentals still intact.

So if you were looking at say, currencies, commodities, or even stocks linked to such sensitive data, you would want to be constantly tracking certain levels, without having to spend your entire day doing so.

A reasonable and faster way would be to get an application that allows the user to set and receive real time price alerts for various financial assets and forex pairs, in a form of push notification and buzz, instead of the normal sms notifications.

It’ll be too late when that happens. Also, it helps if you could create a cc list, and share your desired levels, and watchlist to a closed group of people who are also investors, and will be able to get notifications too when your own call levels are hit.

Won’t hurt to have more than one pair of eyes looking at certain levels and stocks. Call Levels does all of that.

Interest Rates And The Stock Market
With the US economy picking up, does that means more good news for the stock market?

Not necessarily.

On 17 December, Federal Reserve Chair Janet Yellen restored clarity to the central bank’s monetary policy.

While Yellen said that the Fed was on its course to raising interest rates, she mentioned that the Fed will likely hold interest rates at low levels through the first quarter of 2015.

Thereafter, interest rates are expected to rise at a gradual pace.

Theoretically, the equities market could face some pressure in the event of an interest rate hike, though the effect is not a direct one.

When the Fed raises federal funds rate, it creates a “tighter” money supply as it becomes more expensive for the banks to borrow from the Fed. In turn, banks will increase the rate it charges customers.

With more expensive loans, the amount of money consumers can spend falls, meaning less money for investments, which could negatively affect stock performances, particularly after a long period of QE and low interest rates in the US.

During the interview, we concluded that whilst the US economy continues its recovery in 2015, the outlook for the US stock market is mixed. Consumer stocks (with a strong focus on US consumers) are one of our favorites.

Luxury Brands
Somewhere during our discussion, the topic veered towards luxury brands. Cynthia jokingly commented that an investment in a Chanel bag could possibly yield better returns as the value increases over the years (it’s true).

Despite the ongoing anti-corruption campaign in China, Chinese consumers remain one of the biggest (if not the biggest) buyer of luxury goods.

Demand for luxury brands is likely to continue its uptrend. However, some brands will likely outperform others.

Increasingly, consumers’ taste for branded goods are moving upmarket. They are not only seeking quality, but also exclusivity (they do not want something that everyone else is carrying).

Under this argument, we speculate that mainstream luxury brands like Louis Vuitton will slowly fall out of favour, especially to the top-tier luxury goods consumer.

On the other hand, brands like Hermes (who actually has a long waiting list for its flag-ship Birkin bag), will continue to grow, in our opinions.

Hence to all ladies and gentlemen, perhaps it is time to consider investing in the stock of listed luxury-brand company. Besides Hermes International, Prada could also be a surprise favorite, given the relatively toned-down image and classic range.

Summarizing 2015 Outlook
To wrap-up, Daniel reiterated some key points for investors to take note of in the coming year.

  1. US Recovery, the comeback of US consumerism.
  2. Concerns over a massive slowdown in Europe.
  3. Worries of slower growth in Asia.
  4. Gradual interest rate hikes.

An expected slowdown in China’s growth and a poor performing Japanese economy, could weigh down on other Asian economies, including Singapore. However, positive impact if US recover could help mitigate some of the risk.

Investors are advised to stay resilient, as we could see a possible outflow of funds from Asia.
Be careful when looking in property-related plays in anticipation of a possible rate hike, which would result in higher borrowing costs.

Opportunities could present itself in economies in or near distress, so investors who find a lack of chances in the local market could set their sights abroad.

Meanwhile, investors can download Call Levels, a free app on iTunes that would soon also be available on Andriod, to help monitor their investments.

So guys, with a mixed outlook for 2015, let’s Keep Calm And Carry On Investing.

Armed with a bachelor in mathematics, Jia Hui keeps close tabs on the oil & gas, and manufacturing sectors in Singapore.

Please click here for more information about this author.

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