The U.S. will lead the way to an uptick in global market growth in 2015, with different markets picking up steam at different paces, said market forecasters.
In addition to being the year in which the Federal Reserve is expected to finally raise interest rates, forecasters predict 2015 will also be a year in which global equities will outperform global bonds.
“We see a global growth pickup in 2015 that includes emerging markets and developed countries,” said Richard Lacaille, London-based executive vice president and global chief investment officer at State Street Global Advisors.
Mr. Lacaille added, however, that “growth is unevenly distributed.”
Russ Koesterich, managing director and chief investment strategist for BlackRock Inc. in New York, agreed there will be uneven growth. “The key trend next year is we're going to have a market and global economy defined by divergence,” he said. “It's going to be an environment in which different regions and different asset classes are going to perform very differently.”
The ranges of top strategists' forecasts for 2015 were: a total return of the S&P 500 from 5% to 12%, the 10-year Treasury yield at year-end 2015 ranging from 1% to 3.5%; a real U.S. gross domestic product from 2% to 3.8%; and a CPI from flat to 2.6%.
“We got an earlier start on monetary policy,” explained Robert Doll, Princeton, N.J.-based senior portfolio manager and chief equity strategist at Nuveen Asset Management, about the U.S. economy. “Fewer fiscal headwinds going forward will lead to a pickup in corporate spending.”
Timothy Hopper, a managing director and chief economist at TIAA-CREF, New York, said the U.S. will continue to be a market that will see strong demand from both domestic and international investors in 2015, although he noted that he expects to see “more volatility in financial markets here in the U.S.”
“Businesses are starting to spend money and invest back in their businesses. They've been cutting back for the past six years. This means hiring and investing on the factory floor,” Mr. Hopper added. “We think this trend is going to accelerate.”
Unemployment in the U.S. is stabilizing. Sources that Pensions & Investments spoke with said they believed the unemployment rate, currently at 5.8%, would be somewhere between 5.2% and 6% a year from now.
This, Mr. Hopper said, could lead to more wages being paid, a strengthening of the wage rate and an increase in consumer spending. He noted, however, that he thinks “we'll begin to see during the end of next year.”
But not everyone is as optimistic about the U.S.
Eric Lascelles, chief economist with RBC Global Asset Management Inc. in Toronto, said that although the “U.S. is still an attractive place” to invest, it “still may not generate top returns.” He believes “Europe has potential for more return than the U.S.,” explaining “the challenge there is there's more risk and uncertainty centered on that prediction. We think valuations are dirt cheap and recession fears are overblown.”
“The action is abroad. The U.S. economy is moseying along at 2% real GDP growth,” said A. Gary Shilling, president of A. Gary Shilling & Co., Springfield, N.J. “The optimists are assuming there's going to be a big breakout, thinking the private sector is going to take off, but I think that's yet to be demonstrated.”