Dow – 17,191.37 (1/28/15 close)
S&P 500 – 2,002.16 (1/28/15 close)
10-year Treasury – 1.72% (1/28/15 close)

· The Federal Reserve gave no signal yesterday that it’s backing away from plans to raise interest rates this year, noting that it expects unusually low inflation to gradually pick up as the “transitory effects” of tumbling oil prices fade. In a statement after a 2 day meeting, the Fed’s policymaking committee upgraded its economic outlook. It cited recent “strong job gains” and said the economy “has been expanding at a solid pace.” Falling gas prices, it added, “have boosted household purchasing power.”

· The outlook for the U.S. economy in 2015 is for an incremental increase in growth, with further evidence that the economic recovery is becoming self-sustaining and broad-based. Despite the likelihood that the drop in oil prices will bring about a drop in headline inflation, which may go negative on a year-over-year basis early in 2015, analysts find the outlook for the level and momentum of real growth and core inflation in the U.S. – the 2 key inputs in the Fed’s decision-making framework – is likely to propel the Fed toward raising short-term interest rates in 2015, likely starting sometime between June and September.

· Analysts think that the U.S. market is going to head higher this year, but with more volatility. They think that valuations are no longer cheap, but we’re not yet at a level which is consistent with the top for bull markets over the past 25 years. There are still a lot of factors that support stocks from low inflation, low interest rates, strong corporate earnings, and very clean balance sheets.

· Analysts think that Europe and Emerging Markets will underperform the U.S.

· REITs delivered excellent returns in 2014, and analysts are positive on REITs in 2015. They expect sound real estate fundamentals and continued expansion of the domestic economy to provide a favorable backdrop for the REIT market.

· However, U.S. economic growth may be diminished in the coming quarters by economic weakness elsewhere in the world, and given the substantial decline in oil prices, there is some concern about regional economies that benefited directly from the oil and gas industries over the past few years.

· In fixed income analysts like high yield.

The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.


Click to access RealEstate_Commentary.pdf

Click to access PIMCO_CyclicalOutlook_Flipbook_December2014_GBL.pdf