US Economy Recovers Steadily And Corporate Profits Keep Growing

Following the 30% increase in 2013, the US stock market continued its bull market in 2014. It has been rising for sixth consecutive years under the support of loose monetary policy and steady growth in corporate earnings, and the main stock index has continued to refresh its historical high. Most US agencies remain optimistic about the outlook for US stocks in 2015, mainly due to the steady recovery of the US economy, the sustained growth of corporate earnings and the continued easing of liquidity.

　　 Future returns may fall.

Since 2014, the trend of US stocks has been ups and downs. In the early part of the year, severe cold weather hit corporate earnings and investors worried about the slowdown in the emerging market. The S & P 500 index had a callback, especially some high growth stocks in biotechnology and the Internet sector. Then, with the support of the world's major central banks to relax policies and the good performance of the US economy, the US stocks rose again. Despite a sharp fall in mid 9-10, a strong rebound since October has recovered land lost.

Since the bottom rally in March 2009, the bull market in the US equity market has lasted for six years. Since 2014, the S & P 500 index has been on record for the 52 time.

By the end of December 26th, the S & P 500 index closed at 2088.77 points, a record high, rising 13% in the year. The Dow Jones Industrial Average closed at 18054 points, rising 8.9% during the year, and the Nasdaq composite index closed at 4806 points, a cumulative increase of 15% in the year.

Looking forward to 2015, most agencies expect US stocks to continue to rise, driven by factors such as the continued improvement of the US economy, the maintenance of loose monetary policy by most central banks and the active stock repurchase, but the increase has narrowed compared with the past two years. Analysts expect the US economy to grow by 2.2% in 2014 and further increase to 3% in 2015. Profit growth will benefit from the steady expansion of the economy. Analysts expect average earnings per share in the S & P 500 to grow by 8%-10% in 2015, which will become a major driver of the US stock market in the coming year.

Mark Hyafil, chief investment officer of wealth management at UBS (17.27, -0.04, -0.23%), advises investors to increase U.S. stocks, US high-yield bonds and US dollars. He believed that thanks to the strong monetary policy of the Federal Reserve, timely banking capital restructuring and shale gas revolution, the US economy grew steadily and speeded up, which supported corporate earnings and market performance.

The global research department of the Bank of America and Merrill Lynch expects strong fundamentals and healthy growth of the US economy to support investors' optimism. It is expected that by the end of 2015, the S & P 500 index will rise to 2200. Although the era of high return and low volatility has passed, the long-term bull market of US stocks will continue.

By contrast, analysts at Deutsche Bank are relatively cautious and believe that in 2015, the US stock market will start off in the first quarter because of the expected growth in earnings per share and the expected increase in the Fed's interest rate. In the first quarter, the S & P 500 index will probably return more than 5%. The bank expects that by the end of 2015, the S & P 500 index will rise to 2150.

Goldman Sachs analysts believe that although the outlook for the overall market outlook is optimistic, the absolute return on asset prices in the next few years may be relatively low. Although the US stock has potential to rise further, it will not be able to increase its space compared with before.

According to Reuters released the latest survey, Wall Street analysts on the S & P 500 index at the end of 2015 and the end of the year, the average expected points were 2103 points and 2200 points, compared with the 26 closing points 0.6% and 5.3% respectively; the Dow Jones industrial index 2015 year-end and the end of the expected points were 18500 points and 18858 points, respectively, 26 points higher than the 26 and 26.

　　 Federal Reserve Increase interest Or exacerbate volatility.

Despite the good fundamentals of the US stock market, with the continued record high of the S & P 500 index, investors are also worried that the market may be back at any time. Analysts expect that the market volatility will intensify as the normalization process of the monetary policy of the Federal Reserve opens.

In October, the Federal Reserve ended the three rounds of asset purchase plan since the financial crisis. It is widely expected that it will increase its interest rate for the first time in more than eight years in 2015. At the last meeting of interest rates ended in December 17th, the Fed said it would "be patient" in the timing of the first increase in interest rates. Historical experience shows that the Fed adopted the same statement in January 2004 and started raising interest rates in June of the same year.

Institutional views diverge over the impact of the Fed's rate hike on the market. Deutsche bank analysts believe that one of the risk factors facing the market in 2015 is the recovery of the US economy and the rise in inflation leading to the Fed's cycle of interest rate hike, which led to a disorderly drop in the stock market.

Goldman Sachs expects the US Federal Reserve to raise interest rates for the first time in September 2015, pointing out that this means the end of the US stock price earnings ratio expansion period. Corsten, chief stock strategist at Goldman Sachs, believes that the performance of U.S. stocks will be divided in 2015. The first half of this year's economic growth and higher corporate profits will push the stock market higher. But in the second half of this year, interest rate increases will reduce investor interest in stocks and lead to a decrease in the P / E ratio and the stock market will fall. He predicts that by the end of 2015, the S & P 500 index will rise to 2100 at the end of the year, and if it does not raise interest rates, the 2300 point will be expected.

Corsten said that since 1994, the increase in the three months, six months and twelve months of the S & P 500 index after the first increase in the Fed's interest rate were -4%, 5% and 6% respectively, but the P / E ratio dropped by 8% in the three months after the first increase in interest rates. Corsten believes that when compared with the first time to raise interest rates, the pace of raising interest rates will be faster and more noteworthy. He expects the Federal Reserve to continue raising interest rates until the federal funds rate reaches 3.9% in 2018, when the S & P 500 index is likely to reach 2400.

Analysts also believe that if the Federal Reserve starts a rate hike according to the prevailing expectations, and the federal funds rate is orderly and controlled, US stocks will be raised. bull market It can continue smoothly. North American Trust Bank believes that given the relatively mild economic growth and low inflation in the United States, Federal Reserve There should be no negative impact on the market by adopting preventive advance interest rates.

　　 Oil prices have fallen into a double-edged sword.

In addition to interest rate changes, there may be potential risks to the US bull market, such as falling oil prices and the appreciation of the US dollar. Analysts believe that the drop in oil prices will be a double-edged sword for US stocks. On the one hand, the drop in oil prices can reduce the cost of most industries, which is actually equivalent to tax cuts. This will help stimulate consumption expenditure and boost economic growth, especially for big energy consuming countries like the United States.

Goldman Sachs believes that the fall in oil prices is good for the US economy and corporate profits. Although the fall in oil prices will reduce the capital expenditure of the energy sector, the boost to consumption is enough to offset this. The Goldman Sachs model shows that oil prices drop by US $10 per share, raising the earnings per share of the S & P 500 index in 2015 and 2016 by US $2 and US $4 respectively. If oil prices stay near the current level, the S & P 500 earnings per share will reach $125 in 2015 and $139 in 2016, which is 8 dollars higher than the current forecast.

On the other hand, the rapid decline in oil prices has raised concerns about the market. Investors are beginning to worry about the global economic growth prospects, especially deflation pressures in major economies such as Japan and the euro area, and the possible economic recession.

Analysts at the Bank of America and Merrill Lynch pointed out that the drop in oil prices may be both an economic lubricant and a poison. The weak demand of overseas economies is one of the factors that will cause the oil price to drop sharply, which may ultimately threaten the economic growth of the United States. If oil prices fall longer or deeper, the energy production and profits will be suppressed.

The continued appreciation of the US dollar should also be vigilant, which may impact the profits of US exporters. Since hitting the lowest point in May, the US dollar index has risen nearly 14%, reaching the highest level since the beginning of 2009. Goldman Sachs is expected to be further boosted by further interest rates, and the US dollar will continue to be strong.

In the third quarter, large multinational companies including Coca-Cola, WAL-MART, Pfizer and IBM have warned of the negative impact of the appreciation of the US dollar on the fourth quarter and 2015 earnings. Among them, Coca-Cola's estimated exchange rate will drag its annual operating profit by 6 percentage points.

Analysts at Deutsche Bank pointed out that although the actual GDP growth rate in the US could exceed 3% in 2015, the downturn in oil prices and the appreciation of the US dollar will limit the profit growth of us listed companies. It is estimated that the earnings growth of the S & P 500 index in 2015 may be only 3%, much lower than 7% in 2014.