I regularly read a lot of different views on the market to try to get a combined perspective. Predicting short term market movements are difficult and very risky – especially if we change our long term strategy based on a short term outlook. However I found Jim Paulsen’s (Chief Investment Strategist Wells Capital Management in the US) recent analysis interesting.
Paulsen feels the US S&P 500 will trade between about 1800 and 2200 and likely end the year flat. But there are four positive forces that could increase investor optimism and provide a boost to equity markets:
1 – Since commodity prices are showing signs of increasing, thoughts of deflation are subsiding.
2 – Corporate profits will likely be better than thought in the latter half of this year.
3 – Global economies appear to be heading towards a synchronized economic recovery.
4 – Also, fear has returned among investors – typically a good sign that the market is about to turn
For all the details from Jim’s outlook: May-2016 Jim Paulsen Outlook.
In the 80’s and 90’s we were in undated with the idea we would be running out of oil – the peak Oil concept. Since oil reserves continue to be found along with cost effective drilling techniques due to human ingenuity the financial press have now focused on Peak Demand as the next contagion! Somehow demand will flatten out and we will continue to pump millions of barrels of oil which will be saved in storage tanks built as far as the horizon. Really? A maxing of the world’s appetite for its most basic energy source – on a planet where three of the seven billion humans are classified as having an “inadequate supply” of electricity with one billion having no electricity at all? Come on – how many times are you going to ask us to swallow this stuff?
The author Matt Ridley is a realistic optimist. He often takes the less “politically safe” view when it comes to capitalism and the growth of the global economy. The following is a brief quote from his recent essay, “Fossil Fuels will save the world, (Really)” . If your current thinking is fossil fuels are bad and the world will be better off the when we get rid of them, consider this …
“The more energy you have, the more intricate, powerful and complex you can make a system. Just as human bodies need energy to be ordered and functional, so do societies. In that sense, fossil fuels were a unique advance because they allowed human beings to create extraordinary patterns of order and complexity—machines and buildings—with which to improve their lives.
“The result of this great boost in energy is what the economic historian and philosopher Deirdre McCloskey calls the Great Enrichment. In the case of the U.S., there has been a roughly 9,000% increase in the value of goods and services available to the average American since 1800, almost all of which are made with, made of, powered by or propelled by fossil fuels.
“Still, more than a billion people on the planet have yet to get access to electricity and to experience the leap in living standards that abundant energy brings. This is not just an inconvenience for them: Indoor air pollution from wood fires kills four million people a year. The next time somebody at a rally against fossil fuels lectures you about concern for her grandchildren, show her a picture of an African child dying today from inhaling the dense muck of a smoky fire.”
—Matt Ridley, in his essay “Fossil Fuels Will Save the World (Really),” WSJ March 14-15