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Dec 29 2014

The Year of the Dogs

Market Recap:

Stocks are at all-time highs, as a Fed induced rally wiped out any losses created by anxiety over the future of monetary policy. A commitment by the Fed to remain dovish and erring on the side of caution when it comes to raising interest rates, along with strong economic data, the recognition that lower oil prices are broadly positive, and the expectations of continued strong earnings growth all put Bulls back in charge. All sectors of the S&P rose last week, as did commodities and Treasuries.

Looking Ahead:

Expect trading volume to be light during this holiday shortened week. An absence of economic news and year-end portfolio positioning could bring some added volatility, but we generally expect muted sessions until January 5th 2015.

While 2015 is officially the Year of the Goat according to the Chinese Calendar, we expect it to be the Year of the Dogs – the Dogs of the DOW that is – as large high-quality dividend paying stocks should perform well in this environment. Investors concerned that a rate hike will derail the bull market are mistaken. Neither the timing nor the minimal size of the first or second rate hike are likely to have more than a temporary impact on the bull market. Instead investors should focus on the impact of rising wages and the relatively low energy prices, both of which will help the middle class. Large Cap tech, airlines, and middle-market consumer discretionary companies will likely be the big winners from this trend. Lower energy prices will help Europe thaw, making some of their multi-nationals attractive at current levels.

Tune into Fox Business this Tuesday and Friday at 6:00 PM when our President, Oliver Pursche, joins Charles Payne for the hour to discuss our latest outlook. And don’t miss 2015’s first Money Matters show this Saturday at 2:00 PM and Sunday at 11:00 AM when Oliver hosts the program and interviews Wall Street investment great Doug Kass. Visit our website for details.