With the new year only a few days old, there’s still plenty of time for retail investors to craft their strategy for 2015. Like last year, 2015 is full of promise and better overall economic conditions are ahead. Globally, we should continue to improve since the depths of the Great Recession and credit crisis. But the best conditions for stock market gains could be found in the United States.
According to several market strategists and analysts, the U.S. is still the best nation to bet on in 2015. For investors, that means staying strong or even adding to their U.S. stock holdings in the New Year.
Hoping For a Four-Peat
When it comes to picking which stock market may be the best horse to ride, investors may want to stick with the good ol’ U.S. of A in 2015. According to several different analysts’ panels by various news agencies, the U.S. is poised to be the major winner in the New Year, as several bullish factors continue to drive-up equity prices
According to a 48-analyst poll conducted by Reuters, both major benchmarks of U.S. stock strength should reach a rare four-peat of double digit gains on the year. Analysts predict that the broad-based S&P 500 will rise to hit 2,103 by mid-year and top out at 2,200 by the end of 2015. The venerable Dow Jones Industrial Average is expected to close 2015 at 18,858.
Those are gains of nearly 12% and 10%, respectively. It would only be one of a handful of times that U.S. stocks had four-straight years of double-digit gains.
The reasons for the potential increases are many, with the biggest being lower energy prices.
Energy is the Reason
While lower oil has hurt the energy sector, the 40% drop is a boon to the rest of the economy. Automobile club AAA estimates that American’s saved around $14 billion on gasoline in 2014. Throughout the next year, AAA predicts that number to be around $75 billion. Analysts predict that should help drive retail and consumer discretionary spending. This should off-set any declines in oil. Likewise, lower energy costs are helping drive manufacturing gains and hiring. Business investment is also finally picking up after five years of declines
As for the fear of rising interest rates, inflation continues to remain non-existent. That gives the Federal Reserve plenty of room to keep rates where they currently are. Even so, the potential for rising rates has been telegraphed by the markets for several years now. It shouldn’t come as a surprise.
All in all, the U.S. should see gross domestic product rise between 2% and 3.8% in 2015.
Still Time to Buy U.S. Stocks
Given the potential tailwinds still propelling the U.S. forward in 2015, investors may want to give U.S. stocks a go. And as the biggest stock market in the world, there is a multitude of choices to do that. A simple way to is just buy the entire market via a cheap, efficient index fund
At $385 billion in assets, the Vanguard S&P 500 ETF (VOO) is one of the largest and easiest ways to track large-cap stocks in the U.S. VOO tracks the venerable S&P 500 via a full-replication strategy. That means it owns all the stocks in the index. This allows investors to fully benefit from the stock market’s gains in the upcoming year. And as a Vanguard sponsored fund cost of ownership remains low. VOO charges a rock-bottom 0.05% in expenses. Another cheap option is the iShares Core S&P 500 (IVV).
Some of the dissent among analysts on just how well the U.S. will perform stems from the relative high valuation of stocks. To circumvent that investors may want to focus on “value” or dividend stocks. The cash flows from dividend payers should help provide extra return, while value stocks tend to trade at much cheaper metrics. Both the WisdomTree LargeCap Dividend ETF (DLN) and Guggenheim S&P 500 Pure Value ETF (RPV) make adding the styles easy. (For more, see: 2015’s Most Promising ETFs.)
Finally, not every segment of the U.S. market will be major winners — as we’ve seen with energy recently. Analysts cite healthcare, financial and consumer discretionary sectors as ones the sectors that will drive market expansion during 2015. Overweighting these sectors could be a great bet in the New Year. The State Street sponsored Consumer Discretionary Select SPDR ETF (XLY), Health Care Select Sector SPDR ETF (XLV) and Financial Select Sector SPDR ETF (XLF) tack their respective sector holdings in the S&P 500 and are great short- or long-term choices to overweight these sectors.
The time to make our moves into new sectors and markets is now. And according to several strategists, the best place for investors could be U.S. equity. A variety of factors could make it the top market throughout the year and overweighting and continuing to add to the stocks could be well-rewarded. The aforementioned ETFs make doing that quite simple for retail investors.
Aaron Levitt can be contacted on this link: Aaron Levitt