A global, geo-political view
Troy, MI January 15, 2015 – “We believe there are seven major themes that will capture headlines and potentially influence markets in 2015," says Leon LaBrecque, JD, CPA, CFP, CFA, the Chief Strategist and founder of LJPR, a firm managing $691 million in assets*.
Energy/Oil
“With support from Washington, shale technology in the US has the potential to continue to boost economic activity and create jobs,” says LaBrecque. “In 2014, we hit our lowest level of dependency on OPEC in 29 years. Given recent developments, it is clear that OPEC sees the threat this poses to their livelihood and has taken steps to undercut the North American oil and gas initiatives by refusing to decrease supply and thereby decreasing the global price of oil,” says LaBrecque. “Varying estimates have equated the drop in oil prices to the equivalent of a tax cut for the US consumer in the neighborhood of $100-260 billion dollars. The net effect, we believe, will bode well for US economic growth as we move into the New Year and boost consumer sentiment.”
Europe
“Most of the European Union continues to struggle with low growth and disinflation. The European Central Bank is trying to stimulate the economy with more aggressive policies. Whether or not they are successful seems to hinge on whether they act aggressively enough. Global equity markets tend to respond favorably with each statement related to an easy monetary policy from the ECB. Talk is cheap and until more aggressive action is taken, Europe will likely be stuck in neutral. In a more positive light, the instability of the Eurozone and its debt crisis has already been built into expectations, thereby minimizing the impact to global markets going forward,” says LaBrecque.
Emerging Markets/Asia
“When you combine developed and emerging international markets, they represent nearly half of the global equity market capitalization. Within emerging markets, urbanization and a growing middle class are important investment themes,” says LaBrecque. “Economic growth in many EM and developed markets is projected to accelerate. We anticipate that growth prospects in select EM areas will outpace the offsetting increase in the dollar.”
Interest Rates
“The anticipation of a rising interest rate environment domestically seems to be getting long in the tooth. Easy monetary policy on a global scale that has never been seen before has yet to give way to higher interest rates. This is due in large part to a slow recovery in employment, wage growth and weak fiscal policy support. However, as economic growth momentum continues to move forward in the US, we expect the Fed will start to tighten,” says LaBrecque.
Geopolitical Risks
“Being able to assess the next global upheaval is virtually impossible. Current risks we see on the horizon that may or may not amount to a meaningful impact on global capital markets include, but are not limited to: broadening unrest in the Middle East; unilateral action by Israel against Iran; Putin’s Russian military action in Ukraine, North Korean cyber or other attack, and Cuba,” says LaBrecque.
US Budget Issues
“While no one can be certain with anything surrounding politics, the expiration of the debt limit suspension on March 15, 2015, where the potential exists for the US Government to default on its debt seems very low. Interestingly, since 1976, the reaction of US equity markets to Federal funding gaps has ranged from a positive 3% to a negative 5% (i.e., not a major market mover),” says LaBrecque.
Strengthening US Dollar/US Economic Growth
“Whether the dollar is strong or weak, stocks haven’t been highly correlated to the dollar’s movement historically. We think long-term investors with strategically positioned portfolios should not be overly concerned in this area,” says LaBrecque. “The US is leading the global recovery after coming off the worst recession since the 1930’s, and we expect that to continue into 2015, aided by low oil prices. Outside the US, the world is trading at a potential discount and below their long-term averages, which we have positioned portfolios to capitalize on. Low oil, low interest rates, low inflation, growing economies; all bode well. Overall, it’s a positive view.”
Leon C. LaBrecque is the managing partner and founder of LJPR, LLC, an independent wealth management firm located in Troy, MI that manages $691 million in assets (as of 12/31/2014). Mr. LaBrecque is a practicing attorney, CPA, CFP® and CFA that has specialized in servicing individuals, families, and small businesses in the areas of financial, estate, and tax planning for over 32 years. His extensive career includes previous work at Arthur Andersen, Plante Moran, and as the Department Chair of Finance and Economics at Walsh College where he created the Master of Science in Finance program. He has also authored several proprietary retirement planning programs for CalPERS, the states of Montana, and Washington, and corporate clients including General Motors, Ford Motor Company, Lucent, and AT&T, among others. LaBrecque’s specialties include investment management for foundations and non-profit organizations, financial planning for automotive employees and retirees, and retirement planning for police officers and firefighters. Leon LaBrecque’s direct e-mail is leon.labrecque@ljpr.com.
