The last time I went on the record with my economic predictions was in August of this year. It's that time ... year end ... time to look ahead to next year ... and to go on the record about what I think the macro picture will look like in 2015. Here it goes:
Finally. It took long enough. But I believe 2015 is finally the year when the economy truly and undeniably breaks out. Here's my big seven reasons why:
1. Up till now the economy did well in spite of congress. In 2015, I think it's going to do better thanks to congress. Look for the possibility of:
- corporate tax reform including a means for repatriating overseas cash
- natural gas exports and the Keystone pipeline
- compromises on immigration with a path to citizenship
- a way to reduce college debt
(Notice I said "possibility," not "passage.)
2. Innovations take hold across numerous industries bringing about compelling reasons to replace most everything, from cars to hips, and invest to improve your business and your life.
3. Low cost energy continues to drive USA industry. Lower costs factors on everything, from transportation to petroleum based products, save consumers, businesses, and government an enormous amount of money which provides massive stimulus. (The flip side of this would be the negative effects caused by an even more severe decline in oil, below $70K a barrel. If that happens, bankruptcies and slow downs in the industries built around exploration and production, and their suppliers, which would also put a strain on investors and financial markets. Of greater concern is the potential crisis triggered in countries such as Venezuela, Russia, Iran, etc. How that plays out can be very risky and unsettling. Especially with Russia already under major strain from sanctions.)
4. Low interest rates combined with low cost steel and energy costs to make this the time to do historic levels of investment in USA roads, bridges, and rail. We're going to need those "illegal" immigrants! I say let them earn their citizenship by rebuilding America's infrastructure! (It's been done before during the war!)
5. Wage growth and the work force size both jump in 2015. This is a double dose of GDP!
6. The consumer and business confidence lead to a spending spree. Retail comes alive - just in the (saint) nic of time!
7. HOPEFULLY the Federal Reserve stops paying interest on reserves and some of the regulation that's been discouraging banks to lend will lighten up. Equity markets are hot enough, we need the banks to get back into the business of lending!
Need I say ... all this is good for equities!
It also goes without saying that all these ideas can go out the window at any time by some unforeseen major event. But I learned a few years back not to speculate. At least not about "black swains."
