With that being the case, analysts are forecasting that the U.S. market will be the best performing worldwide.
2014 turned out to be a year in which there was a tick up in some world markets. Still the success varied from economy-to-economy.
Here is an indication on how the major markets did last year.
• U.S. – S&P 500: +11.39%
• Japan – Nikkei 225: + 7.12%
• Europe – FTSE 100: -2.71%
• China – HSL: +1.28%
• BRICs – iShares MSCI BRIC Index Fund: -4.25%
• All Emerging Markets – Vanguard Emerging Markets Stock Index Fund: -4.25%
Of the three major markets of the U.S., Europe, and Japan, the U.S. market performed best with Japan second and Europe, which experienced a loss, third.
On first analysis lower energy prices may seem like a boom for economies. Lower energy prices results in higher profits. That sounds good. However, energy trades on the futures market is falling which will result in a continued decline in energy prices and demand for energy will be lower. This causes analysts to predict a decline in growth. The savings achieved by lower energy costs won’t outweigh the losses due to fewer investment opportunities and lower sales.
Analysts say that the fall of oil prices may not affect the performance of the stock market. Investors in stocks point to 1997, 1998, and 1999 when oil prices fell by more than half while stocks rose more than 70%.
One reason why the price of oil is falling is the growth of the U.S. shale oil market. If this continues, then competitive pricing may signal a new pattern in the overall oil marketplace. The result could be a decline of OPEC and a $50 per barrel price as the new global standard. The outcome could be that the U.S. will have global influence on oil production. This could translate into a sizeable boost for the domestic economy in the long term.
Another reason for America’s economic power is the strength of the dollar. The dollar hasn’t been this high since 2006.
One cause of this is the decline of commodity prices. During the past six months, the Reuters/Jefferies Commodity index has fallen more than 25% while the U.S. dollar index has jumped about 15%. So the dollar should remain strong in 2015 or until commodities return.
Another cause of America’s economic strength is the weakness of the Japanese yen and the euro. Both currencies are trending down when compared to the dollar. Analysts expect that the dollar will trade at parity with the euro because of the possibility of deflation.
European debt yields are dropping too as well as the value of the euro. This is resulting in a sub -2% yield on the 10-year Treasury. Making the Treasury look attractive to investors. The Treasury yields are also better than the Japanese 10-year yield, which is under 0.30%. Analysts argue that this will help the dollar stay strong even as yields are being pressured down.
Investors are also concerned about what the Federal Reserve will do about interest rates in 2015. Last year ended with expectations that rates will increase, probably this summer. However, inflation and debt yields have not risen.
The inflow of foreign capital is helping to keep rates low and since 2011, inflation has declined from 3% to 1.3%. Due to the low cost of oil and capital coming in from overseas, interest rates will not increase.
Finally, stocks are in for a good year. Analysts expect a correction to take place some time during the year. Still, they say that there are too many opportunities to cause stocks to reverse their course.
As energy prices continue to fall and consumer utilities prices fall, more money will be available for spending in the economy. That could help to jack up the real estate market.
All of this should come together to cause a great year for the U.S. economy and dominance of the other world economies in 2015.