By Larry Greenfield
The New Year is upon us and whilst some financial trends have been broken others remain in place. Let’s talk this month though about long term investment trends. I personally do not believe the business cycle has changed fundamentally. We could be due for a mild recession but due to the nature of our overall economic recovery I don’t think the slowdown will be dramatic. A down year is possible. December is traditionally a strong month and this December, though volatile does not appear to be a very strong one an ominous prelude to the New Year. Treasury Yields have been going down for what seems like forever and I do not see that trend changing.
Deflationary trends are everywhere. Oil prices are bringing many nations to their economic knees from South of the US Border to Russia. The relatively high yields of the USA Treasury note and the safe haven that the USA provides will underpin another year of strong buying of our government’s debt. This is where I see opportunity. The huge declines in energy prices will hurt and continue to hurt energy companies. I don’t see the full effect of these declines in energy prices reflected in the market. There has been huge borrowing in the energy sector for acquisitions and infrastructure. I think there will be a big opportunity to buy stocks and high yielding bonds in 2015. If a route is on expect a huge sell off in all high yielding debt as hedge fund managers are forced to liquidate.
Though I do continue to invest personally in stock I am a wimpy investor by Gordon Gecko’s standards and I prefer bonds. There are a lot of high yielding bonds right now in the energy sector. An investment in a corporate bond is a bet that the company will not go out of business. My advice is to wait it out if lower energy prices persist there just may be a panic in energy bonds and the high yield sector overall. Just the thing for a patient investor looking for juicy yields to sink their teeth into.
Happy New Year and happy hunting!