Goldman Sachs are out with their outlook … “Top Ten Themes for 2015:
In brief (bolding mine)
The price of oil will continue to fall … Goldman says there is a “new oil order”
- Says that the “material expansion in oil service capacity in recent years is likely to lead to 5%-15% cost deflation across oil developments”
- Says the implications are significant: a stimulus for consumers, a likely boost towards GDP growth in both emerging markets and developed market countries that import oi but a negative for those countries where oil exports are a key source of revenues
The US dollar bull market will continue
- Goldman says the continuing strength of the US dollar is its “strongest asset market view looking through 2015”
- Says that further falls in the euro (against the USD)
- Also anticipates further yen weakness
- “We are in a multi-year phase of USD recovery”
The first rate hike from the Federal Reserve won’t come until September 2015
- Goldman warns then that once the Fed does begin to hike in September 2015 it will move the Fed funds rate more quickly than the market now expects, and the terminal rate will be higher
- “Our view of the rates path further out in the forecast is now clearly above what the market is pricing and by a significant margin by 2017”
Expect the recovery to broaden beyond the U.S.
- Sees Japan and Europe, as well as emerging markets outside of China, improving
- They point to lower oil prices, further easing of financial conditions, some relaxation in lending
The growth gap between U.S. and the eurozone will remain wide
“Lowflation” … expects disflationary forces to remain strong through 2015
China …
- “Relatively solid GDP growth of between 6% and 7% over the next couple of years”
- But the upside in China related assets is limited in 2015
- “Markets will focus on the month-to-month fluctuations in activity and policy, the anti-corruption campaign and the shift towards a ‘cleaner’ growth model”
Emerging markets …
- India, Thailand and Chile are the best improvers
- “2015 will also see more polarization between countries that have addressed their macroeconomic imbalances and are on the right side of the oil import/export divide and those that have not”
The low-volatility environment will persist into 2015
The market outlook overall is “quite benign” … yield on equities still makes them relatively more attractive than sovereign bonds
