Gluskin Sheff’s David Rosenberg described himself as “the poster boy for the bull market” in a note to clients last week.
“The US economy does not seem to need either the housing market (or the export sector for that matter) when practically every other engine is humming along and driving growth to its best performance in 11 years — funny enough, 2003, like now, was the breakout year following a horrible recession, deflation scare, terrorist attack, war and jobless recovery,” he wrote.
Besides Rosenberg’s call that equities will certainly not enter a bear market next year, here are his 13 investment ideas and why they are compelling for 2015.
- US tech stocks are attractive because they are relatively cheap and collectively have strong balance sheets. They also stand to benefit from strong domestic demand.
- Consumer discretionary stocks will benefit from a growing jobs market, lower oil prices and a strong dollar that makes imports cheaper.
- Canadian banks have a 4% dividend yield and are well valued even though they struggle to develop new sources of growth.
- Euro zone financials had a rough year in 2014 but there’s more upside than downside potential moving forward. They trade cheaply, and some of them have multiples less than 10.
- European stocks generally provide a 3.7% dividend yield, compared to the yield on the 10-year German bund that’s plunged below 0.60%.
- Large-cap exporters with exposure to the euro are well positioned as the ECB tightens its monetary policy and puts the currency in danger. They will also have a strong US economy to thank, with 3% growth forecast, compared to 1% domestic growth.
- Energy stocks may rebound after a dismal year because that’s what’s historically happened in the few years following a huge gap between the sector’s annual performance and the rest of the market. Moreover, the selloff in oil may be overdone.
- High-quality corporate bonds and emerging market junk bonds are better opportunities than US debt. The front end of the curve is already pricing Fed tightening.
- US non-investment grade bonds fell this year when investors sold off energy companies. The bonds’ average yield rose to 6.62% (98.9 cents on the dollar). They could return roughly this amount in 2015.
- Japanese stocks will benefit from low inflation that will prompt the Bank of Japan to increase its stimulus. Stocks are up against a negative yield on the two-year Japanese government bond and 1.23% on the 30-year.
- Emerging markets should be considered on individual merit. Countries like India and Mexico that have undergone economic reforms are attractive, but others like Colombia and South Africa risk current account deficits.
- Commodity importers from South Korea to Poland are benefiting from the collapse in oil prices.
- Chinese stocks have had a bumper year despite economic weakness. The new monetary easing policy to give banks a wider regulatory deposit base sent the Shanghai Composite Index to a record high and should continue to be supportive of stocks.