December 2014 Monthly Strategy Dashboard

Last month greased the gears of the bull market mechanism as oil declined further and OPEC stepped aside.


The price of oil fell nearly 18% from the end of October through the end of November bringing the decline in the year to date to  32.8%. Rising worry about the effects of sluggish global growth on demand for oil and speculative projections of disinflation (and even deflation) added to the downward pressures on the price of the “black gold” as evidence of plentiful supply became magnified in investors’ eyes.  The month came to an end with significant drama as  OPEC’s decision to not curb production surprised both speculators and investors.


It took several days into the new month for investors to consider that outside of the oil sector and oil producing economies, cheaper oil for what might be an extended period might not be all that bad for countries that are oil import-dependent, for most industries outside of the oil patch, as well as for the U.S. and global consumer.


As Thanksgiving weekend progressed into early December gratitude at the gas pump restored interest in prospects for what cheap oil could do for the economy that was beneficial rather than detractive.


Stocks stateside advanced in November with the S&P 500, the S&P 400 and the Nasdaq Composite posting respective gains of 2.45%, 1.69% and 3.47%. The Russell 2000 closed essentially flat with a negative bias, off 0.02%.


In the Near term:


From here forward we'd say the equity markets will rely more on traditional supports including economic growth, revenues, earnings and expectations of sustainable economic growth. 

 

Developments tied to the decline of the price of oil are likely to sweeten the effects of the improved economy on jobs and consumption stateside.
 

On November 24th we initiated our year end 2015 target for the S&P 500 of 2311 or some 12% above where the market closed on October 31,st (which was the day it closed at 2,018.05 exceeding  our 2014 in 2014 target for the benchmark which we’d initiated on November 19th, 2013).We project earnings for the S&P 500 in 2015 at $126 or approximately 8% above earnings this year.
 

We look for incremental improvements in Europe to develop as the ECB embraces the concept of Quantitative Easing (QE) and launches its own version across the region.
 

We remain convinced that former Chairman of the U.S. Federal Reserve Ben Bernanke wasn’t just joking when he quipped, “The problem with QE is that it works in practice, but it doesn’t work in theory.”
 

While the recent strength of the dollar has served as performance headwind for U.S. investors in European stocks, the strength of the greenback offers opportunity to buy quality European assets at a currency discount for now. “Gather ye Rosebuds while ye May” indeed.
 

Carpe diem.  
 

Stay tuned.

Note: Return calculations exclude applicable costs including interest and commissions.


 

Important Disclosures and Certifications

Analyst Certification - The author certifies that this investment strategy report accurately states his/her personal views about the subject securities, which are reflected in the substance of this investment report. The author certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this investment strategy report.

 

Important Disclosures

The strategy presented here is provided by Oppenheimer & Co. Inc. It reflects analysis of fundamental, macroeconomic and quantitative data to provide investment analysis with respect to U.S. securities markets. The overview in this report is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation for any security or investment advisory services. The report is not intended to provide personal investment advice.

 

Securities and other financial instruments discussed in this report or recommended or sold by Oppenheimer & Co. Inc. are not insured by the Federal Deposit Insurance Corporate and are not deposits or obligations of any insured depositary institution. Investments involve numerous risks including market risk, counterparty default risk and liquidity risk. Securities and other financial investments at times may be difficult to value or sell. The value of financial instruments may fluctuate, and investors may lose their entire principal investment.

 

Distribution in Hong Kong: This report is prepared for professional investors and is being distributed in Hong Kong by Oppenheimer Investments Asia Limited (OIAL) to persons whose business involves the acquisition, disposal or holding of securities, whether as principal or agent. OIAL, a subsidiary of Oppenheimer & Co. Inc., is regulated by the Securities and Futures Commission for the conduct of dealing in securities, advising on securities, and advising on Corporate Finance. For professional investors in Hong Kong, please contact researchasia@opco.com for all matters and queries relating to this report.

 

Potential Conflicts of Interest

Strategic analysts employed by Oppenheimer & Co. Inc. are compensated from revenues generated by the firm. Oppenheimer & Co. Inc. generally prohibits strategists and members of his or her households from executing trades in the securities of a company that is discussed in a strategy report. . Recipients of this report are advised that any or all of the foregoing as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest.

 

Other Disclosures

This report is issued and approved by Oppenheimer & Co. Inc., a member of all Principal Exchanges, and SIPC. This report is distributed by Oppenheimer & Co. Inc., for informational purposes only, to its institutional and retail investor clients. This report does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such offer or solicitation would be prohibited. The securities mentioned in this report may not be suitable for all types of investors. This report does not take into account the investment objectives, financial situation or specific needs of any particular client of Oppenheimer & Co. Inc. Recipients should consider this report as only a single factor in making an investment decision and should not rely solely on investment recommendations contained herein, if any, as a substitution for the exercise of independent judgment of the merits and risks of investments. The strategist writing this report is not a person or company with actual, implied or apparent authority to act on behalf of any issuer mentioned in the report. Before making an investment decision with respect to any security discussed in this report, the recipient should consider whether such investment is appropriate given the recipient's particular investment needs, objectives and financial circumstances. We recommend that investors independently evaluate particular investments and strategies, and encourage investors to seek the advice of a financial advisor. Oppenheimer & Co. Inc. will not treat non-client recipients as its clients solely by virtue of their receiving this report. Past performance is not a guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance of any security mentioned in this report. The price of the securities mentioned in this report and the income they produce may fluctuate and/or be adversely affected by exchange rates, and investors may realize losses on investments in such securities, including the loss of investment principal.

 

Oppenheimer & Co. Inc. accepts no liability for any loss arising from the use of information contained in this report. All information, opinions and statistical data contained in this report were obtained or derived from public sources believed to be reliable, but Oppenheimer & Co. Inc. does not represent that any such information, opinion or statistical data is accurate or complete and they should not be relied upon as such. All estimates and opinions expressed herein constitute judgments as of the date of this report and are subject to change without notice. Nothing in this report constitutes legal, accounting or tax advice. Since the levels and bases of taxation can change, any reference in this report to the impact of taxation

INVESTMENT STRATEGY

should not be construed as offering tax advice on the tax consequences of investments. As with any investment having potential tax implications, clients should consult with their own independent tax adviser.

 

This report may provide addresses of, or contain hyperlinks to, Internet web sites. Oppenheimer & Co. Inc. has not reviewed the linked Internet web site of any third party and takes no responsibility for the contents thereof. Each such address or hyperlink is provided solely for the recipient's convenience and information, and the content of linked third party web sites is not in any way incorporated into this document. Recipients who choose to access such third-party web sites or follow such hyperlinks do so at their own risk. The S&P 500 Index is an unmanaged value-weighted index of 500 common stocks that is generally considered representative of the U.S. stock market. The S&P 500 index figures do not reflect any fees, expenses or taxes. This research is distributed in the UK and elsewhere throughout Europe, as third party research by Oppenheimer Europe Ltd, which is authorized and regulated by the Financial Conduct Authority (FCA). This research is for information purposes only and is not to be construed as a solicitation or an offer to purchase or sell investments or related financial instruments. This report is for distribution only to persons who are eligible counterparties or professional clients and is exempt from the general restrictions in section 21 of the Financial Services and Markets Act 2000 on the communication of invitations or inducements to engage in investment activity on the grounds that it is being distributed in the UK only to persons of a kind described in Article 19(5) (Investment Professionals) and 49(2) High Net Worth companies, unincorporated associations etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended). It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. In particular, this material is not for distribution to, and should not be relied upon by, retail clients, as defined under the rules of the FCA. Neither the FCA’s protection rules nor compensation scheme may be applied. This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Oppenheimer & Co. Inc. Copyright © Oppenheimer & Co. Inc. 2014.