I believe we have started the year as we will likely go on. 2015 will likely be the year of step change in volatility.
Before we turn to 2015 projections and technical considerations lets for a moment reflect on 2014
2014 was the year of the US$s return.The US$ strength played havoc with performance numbers this year.
US equities provided the major returns. And dollar trade weighted the returns were even more impressive.
Dow + 7.5%
SP500 + 11.4% (inc dividends 13.7%)
Nasdaq +13.4%
UK FTSE -9% (in usds)
CAC40 -12% (in usds)
DAX -12.2% (in usds)
FTSE100 -3%
STOXX600 +4.2%
CAC40 -0.5%
DAX +2.65%
IBEX +0.3%
Portugal -27%
Greece -29%
Brazil -3%
Mexico +1%
Columbia -11%
China +52%
Hongkong +1.3%
USD DXY +13%
Rouble -76%
Bitcoin -57%
Gold -2% (in US$s. In most currencies she rose in 2014)
20yr+Tbond +27% (+40% if you dollar adjust for euros).
2yr T-bond yields have moved from 0.4% at the start of 2014 to 0.7% today.
The yield curve is front end steepening as the Fed’s long anticipated rate rises get priced in to the short end. Judging by the long end its fair to say that very few participants expect the rate rises to sustain given how well the long end has performed this last year.
US Consumer credit. The 30yr US fixed rate mortgage rate
1st Jan 2014 = 4.55%
31st Dec2014= 3.85%
Mortgage costs in the US have reduced by 15% or so in the last year across both the 15yr and 30yr fixed term loans.
Petrol prices in the US are down -25% in 2014
US Crude oil, WTI is down nearly 50% in the year.
US Gold -2%.
Euro Gold +10%
Copper -15%
Commodity index CSGI -33%
Initially i was disappointed with a +12% for the year achievement but given the many traps into 2014 that you could have easily have fallen into it wasn’t a bad score overall. A “good effort” but with work to do to shine!
There is so much to say for 2015. My five major themes that I pick out are as follows:
1) Year of Capital Risk
The easy money left the table in 2013. 2014 produced a strong euro return but 2015 will likely be a year where the bear returns and volatility steps up a gear.Avoiding capital destruction will be the likely theme of 2015.
2) Bottoming of Bond Market Interest Rates
Rates have stayed persistently low and surprisingly so for 2014. In my view 2015 will finally see the central banks overstep their quantitative measures. Probably as a result of trying to save risk markets from steep falls. The result will finally mark the end of low inflation and rates and set the seeds for the resumption of Bullion’s historic secular bull market.
3) Sector Rotation from high yield defensive into classical cyclical stocks. (The end game for Reits as a defensive safe heaven? The resurrection of the banking sector).
4) The likely laggard entry of Europe finally joining the quantitative inflation race.
5) The early signals of the limits of the quantitative inflation race (Britain & Japan).
There is much to add to these themes but for now i’m forced to provide the reports and data to you that assisted in providing the threads of evidence from which we can single out these core themes.
Without delay here the reports:
Firstly JP’s 2015 view
Here JP’s quick 2014 nos guide
And next JP’s 2015 strat doc
And next, I have released this a few weeks ago but I remind here as its a useful reference point:
And here the CS 2015 macro trades report:
And here the CS FI 2015 view
And here the CS bank sector view
And here the BR view of 2015:
And here SC house strat for 2015:
And here the Opp view:
And here is Yardeni providing a good US$ centric view of 2014:
And here Yardeni with a view of US corporate profits
And here a trio of commodity reports for 2015:
Firstly DB:
Secondly here Danske:
And here yardeni on commodities:
And here the last cftc report from scotia for FX positions:
And here the regular ML FX weekly tech report:
Tomorrow is a big news day in the FX markets for any active fx traders. I mentioned this link in the forum pages but ill provide the link here again as a very useful live data update news site. If you don’t have a live news feed as a part of your platform this link will be useful to you :
http://www.fxstreet.com/economic-calendar/
Many in the market are on holiday until the end of this week so expect a catch up of reports next week.
Which brings me finally to the last report of today. Namely the Swiss team’s award winning technical multi market report. This is not their regular weekly report but their annual preview of the year to come. Its an outstanding piece of work that must have required a huge amount of back ground research. In this cross correlated algo driven market it really assists in seeing the wood for the trees by looking across asset classes in a way few other reports do.
Without delay here their report:
All the best guys. I wish you all a prosperous, happy and healthy 2015.
Rich