January 2015

In assessing the market outlook for 2015 there are several factors to consider. However, the big issue at the moment, in January, is the oil price. The sharp decline in the oil price over the past few months is bad news for oil producers and anybody supplying them. However, it is good news for everyone else as it is the equivalent of a substantial tax cut which means everyone will have more money to spend on other things. Looking at it another way people who produce oil rarely spend the profits, but those who buy it are big spenders and will appreciate a few extra dollars in their pocket. Putting this into numbers, the IMF estimates that a US$25 fall in the oil price should add around 1% to global growth over the following three years and as Brent crude has fallen some US$70 from its US$118 high in 2014 this implies a positive impact on global growth of nearly 3%.
Looking at the bigger picture recent economic data has been mixed and there are clearly major problems in the global economy, but there are as yet few signs the world is slipping into a major recession. Given our top down approach to asset allocation and stock selection we will consider the major markets in turn.
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