Keystone's 100 Predictions for 2015
It’s time for another year of predictions that will provide numerous laughs in December 2015. Making predictions one year in advance may seem like a fool’s errand but it is a very important exercise for all trader’s to hone their intermediate and long term strategic forecasting abilities. Use the table below as a template to write your own predictions and better yet have a friendly wager with an associate to see who can emerge as the wise forecaster one year from now.
Wall Street analysts and traders are universally bullish targeting the SPX 2150 to 2300 range or higher for 2015 representing a +4% to +12% gain. Perhaps they will prove correct, perhaps not. The power of the central bankers such as the Fed and BOJ, and especially the ECB which is on the cusp of providing QE in early 2015, can never be underestimated.
Keystone’s prognostication for 2015 is for the broad indexes to place a multi-year top a la 2000 and 2007. The Keystone Speculator® is the only Wall Street analyst calling for a down stock market in 2015. Keystone was looking for the multi-year top in 2014 but the central bankers and stock repurchase programs prove too powerful. The market top is expected anytime in the first half of 2015 and may already be in place with the SPX 2094. If not, SPX 2130 should serve as the intra-year market top for 2015.
Keystone continues to forecast an ongoing disinflationary and deflationary scenario. The US has been in a disinflationary and deflationary funk since 2012; for the last three years despite pundits touting anecdotal evidence of inflation.
Do not confuse Keystone’s prognostications with actual trading positions. Keystone typically describes ongoing and new trades on the blog as they occur and the status of the Keybot the Quant algorithm, that controls 65% of the portfolio, is constantly displayed in the left margin. Simply reference Keybot’s status if you ever want to know whether the stock market is in a bull or bear market pattern. The weighting numbers in the left margin provides insight into Keystone’s overall status on the market based on the actual dollar amounts invested.
Keystone provides the following 100 predictions for 2015;
SPX High for 2015: 2094 (current 2094-ish high may serve as the market top; if not then 2130)
SPX Closing Price for 2015 (SPX Begins at 2059): 1898 ($115x16.5)
SPX Low for 2015: 1560
[The consensus on Wall Street is for a gain of +4% to +12% to SPX 2150-2300 and higher. The current price at 2060-ish ($125x16.5) to begin the New Year reflects S&P 500 earnings at $123 to $126 with a PE of 16.5 to 17.0. The 2007 market top occurred with a 20.3 PE and the 2000 top with a 26.2 PE. The current 17-ish PE is misleading since the RUT small caps are above 20 PE for well over one year and the 17 is an artificially lower number due to the obscene and aggressive stock repurchase programs over the last three years. Using a 30% or more correlation for the buybacks hints that the current PE would be more in the 20-24 range without the two-year ongoing buyback orgy. For 2015, the Wall Street consensus is expecting about a +10% or more increase in earnings which would be $135 to $137 with an ongoing PE multiple at 17 for the SPX 2300 target. Keystone projects earnings to drop, not rise in 2015, to $115 which targets SPX 1890-1960.]
Dow Industrials Range in 2015 (INDU): 15000-18300
Dow Industrials Closing Price for 2015 (INDU): 16200
Nasdaq Composite Range (INDU): 4000-4850
Nasdaq Composite Closing Price (INDU): 4250
Russell 2000 Industrials Range (RUT): 1000-1250
Russell 2000 Industrials Closing Price (RUT): 1050
Dollar Range (USD): 86-98
Dollar Closing Price (USD): 92
Dollar/Yen Range (USD/JPY): 105-125
Dollar/Yen Closing Price (USD/JPY): 115
Euro Range (XEU): 1.10-1.35
Euro Closing Price (XEU): 1.20
2-Year Note Yield Range (UST2Y): 0.43%-1.65%
2-Year Note Closing Yield (UST2Y): 0.55%
10-Year Note Yield Range (TNX): 1.50%-2.80%
10-Year Note Closing Yield (TNX): 2.15%
30-Year Note Yield Range (TYX): 2.30%-3.30%
30-Year Note Closing Yield (TYX): 2.90%
Will the Yield Curve Invert? No, but the flattening behavior continues. Stocks can fall into a bear market without an inverted yield curve as they did in five notable periods; early 1962, 1976-1978, 1987 into the crash, 1998 and 2011.
2-10 Spread at End of Year (Starts at 150-ish): 160-ish (2.15% minus 0.55%)
Unemployment Rate % Range: 5.3%-6.6%
Unemployment Rate % December 2015: 6.3%
Will Any Monthly Jobs Report During 2015 Be Under 200K Jobs? Yes
Will Wage Inflation Appear in 2015? Some in the beginning of the year due to minimum wage increases and yearly raises but flat and stagnant after that all year long disappointing the Fed.
GDP Average During 2015: 2.5%
WTIC Oil Range (WTIC): 30-85
WTIC Oil Closing Price (WTIC): 55
Brent Oil Range (BRENT): 40-90
Brent Oil Closing Price (BRENT): 60
Natty Gas Range (NATGAS): 2.00-3.50
Natty Gas Closing Price (NATGAS): 2.10
Gold Range (GOLD): 1000-1400
Gold Closing Price (GOLD): 1180
Copper Range (COPPER): 1.40-3.20
Copper Closing Price (COPPER): 1.95
Commodities Range (CRB): 200-300
Commodities Closing Price (CRB): 230
China Growth Rate % Average for 2014: 6.6%
The market sentiment is strongly bullish as the New Year begins. The majority consensus does not expect any serious stock market trouble until Fall 2015 or later. The market turmoil will probably be pulled forward into the springtime and early 2015.
Keystone says a multi-year stock market top will occur in 2015. (Keystone has called for a multi-year top over the last one year but the central bankers are powerful.) Going into 2015, the monthly charts for the major US indexes as well as DAX and FTSE are lined up or lining up with negative divergence forecasting a significant top and extended multi-month and perhaps multi-year weakness ahead for equities. So 2015 is expected to be a down year for stocks.
The 18-year cycle is the most reliable cycle and currently the secular bear from 2000 to 2018 is in play. Dramatic rallies are common in the secular bears and reflective from 2003-2007 and from March 2009 to present. Since only four years remain in the secular bear and stocks are at record highs, a down year is expected for 2015 and it will not be surprising to see stocks down three of the next four years. The current six-year rally is one of the longest in market history.
The buybacks, dividend increases and M&A activity will continue but at a slower pace. Selective sectors such as oil drillers, coal stocks, junior gold miners and natty gas and oil shale companies may experience strong M&A activity in 2015.
Earnings will not increase by the robust projections touted by analysts. The lower oil prices will hurt the earnings at companies exposed to the oil business (far more companies than people realize). The two years and more of flat to struggling top line revenue numbers for all companies across the board will continue and finally bite into the EPS numbers. Companies are at bare-bones staff levels and are using technology for efficiency so there is nothing remaining to cut. If the top line does not grow, then many businesses will begin worrying about shuttering the doors increasing the developing economic malaise in the States as the year proceeds. With stagnant sales companies have to cut each other’s throats and some do not survive.
Global bond yields, Treasury yields, currencies including the euro, dollar/yen and US dollar index, and commodities including gold, silver, copper and oil are going to move much more sideways than anyone expects frustrating bulls and bears alike in these asset class. Commodities will remain weak in the deflationary environment. In a global slowdown the need for raw materials diminishes.
A deflationary environment grows in the US importing the malaise from Europe. The idea that the US will go merrily along with a robust economy while the rest of the world is in an economic slump is not realistic. The global contagion and deflation will be exported to the US.
Wage inflation does not occur in the US despite a sign of life in late 2014. Wages will remain encouraging for the first couple jobs reports and receive a boost from minimum wage increases and other beginning-of-the-year raises but this bump will be short-lived with wages remaining stagnant all year long greatly disappointing the Fed. Inflation, which the Federal Reserve has tried to create for six years, cannot exist without wages increasing.
The Federal Reserve will not raise rates in 2015 since the economy and stock market will weaken. Confidence will be shaken in the Fed since the obscene Keynesian money printing scheme has not worked after six years. Traders and investors become concerned that the Fed has maintained the ZIRP Forever policy far too long and now has no ammunition to battle back at an economy that is losing steam. Trouble begins when confidence is lost in the central bankers.
The oil and gas shale industry in the US will slow and this will slow the overall economy. The shale industry stealthily supported the economy and stocks on the way up and now will stealthily drag stocks and the economy lower.
The US oil and gas shale industry has been a strong catalyst for HD and LOW stock which will fade in 2015.
Sugar is Keystone’s fave long commodity for 2015. Last year it was coffee which worked out well. Keystone likes CANE and SGG.
Commodities, oil, gold and copper should all travel sideways during the year confounding both bulls and bears alike reflecting an ongoing lackluster global economy. Traders, strategists, analysts, economists and investors will realize that weak commodity prices are very much a global demand problem and not completely a supply problem as the consensus of traders believe in December 2014.
Coal stocks are a buy in 2015.
The Dividend Stock Bubble will burst sending SDY and DVY lower during 2015.
The Biotech Bubble will burst sending IBB and biotech stocks lower.
Financials will underperform in 2015.
The high-yield trouble will continue especially with the exposure to the oil and energy companies struggling due to lower oil prices. Watch HYG and JNK.
PCLN will end the year under 1000.
AAPL will print under 90. Apple Pay will not be as much of a success as hoped. Tech projects in general nowadays are dependent on decadent spending by consumers. This activity occurs at all tops like 2000 and 2007 where everyone expects good times to continue with those working not experiencing any fear or worry. When the economic malaise hits and people realize they may lose their jobs, the spending will decrease dramatically and most of the tech start-ups now in progress that involve point-of-sale purchases and anything to do with consumerism will be slapped silly. Many in Silicon Valley will be surprised at how fast some tech projects are no longer viable and simply disappear. The folks that one day are involved in a hot-shot tech start-up will find themselves the next day inquiring about how to collect unemployment insurance.
TSLA will touch 120 this year; Tesla begins 2015 at 225-ish.
FB will underperform the market and the social internet stocks group and print under 60 this year. Facebook will perform the proverbial faceplant. User activity will decrease in 2015 as folks seek other more secure web sites that do not require boatloads of personal information. Facebook begins 2015 above 80. FB will flameout in 2015; the luster is off the rose. Instargram carried the popular web site in 2014 but that is priced in to the stock. SnapChat and other social sites are popping up all the time. Small Ello is grabbing a tiny share. FB will always maintain a loyal following of Mom’s, and various ethnicities that use the site to congregate, but FB will only be a steady eddy producer and not a growth company. So FB will do fine as a company but the stock price will likely retreat in 2015 and disappoint investors.
SHLD will drop into financial trouble far more quickly than expected since the overall economy will falter.
TWTR will bounce back after CEO Costolo leaves. The rumors are rampant that Costolo will step down. TWTR stock will likely move sideways into a triangle pattern during the first half of the year and then finish strong the second one-half of the year. So traders that are willing to hold Twitter for the majority of the year will be rewarded in the end.
Questioning the great American consumer’s strength is typically foolish but the retail sector should top out in 2015 and trend lower on an intermediate and long term basis forward. Watch RTH and XRT.
The healthcare sector XLV will underperform in 2015.
Either WLL or CLR in the oil and gas space will get taken over.
Since the Saudi’s do not want to limit oil production to help oil prices recover and stabilize, a pick-up in pipeline explosions may occur especially in the first half of the year. Countries that are hit hardest by the collapse in oil will use renegade terrorists and mercenaries to carry out selective pipeline sabotage and other nefarious deeds such as targeting oil storage ships and facilities to create supply disruptions and send prices higher. Oil prices are most negatively impacting Russia, Iran, Venezuela and Nigeria.
Saudi Arabia that desires to break the back of the North American oil industry (Canadian tar sands and US shale) ends up causing serious damage to their own economy. This leads to social unrest and Saudi King Abdullah’s health is not an encouraging development. His half-brother successor is pushing 80 years old. Saudi Arabia needs a successor for the successor. The Middle East is a powder keg. The oil war of attrition breaks down between the Saudi and North America oil producers with losers all around.
Israel’s leader Benjamin Netanyahu will receive lots of attention in 2015 and be a strong voice in the Middle East as the region falls apart and destabilizes. The rhetoric will ramp up concerning Israel striking Iran before they build a nuclear bomb.
Syria War will continue all year long and destabilize into non-stop regional conflicts by territorial warlords and groups like Libya and regions of northern Africa.
The Ukraine civil war continues all year long. Russian President will keep poking a stick in the West’s eye despite the low oil prices and the ruble collapsing. Fighting will slowly increase across eastern Ukraine.
The cold war between Russia and the West escalates during the year and Putin becomes more unpredictable.
Europe will remain mired in deflation for 2015 and confusion over ECB policies will develop. ECB President Draghi’s stimulus plans are not as robust as hoped and are met with mixed enthusiasm. The majority consensus is that Draghi fires the money bazooka with a full-blown QE sovereign bond-buying program sending European stocks higher. However, Euro zone bond yields are already low. Greece is unstable and Germany will continue fighting the Keynesian path for Europe. The DAX monthly chart is negatively diverged across all indicators. European stocks should move sideways to sideways lower in 2015 completely counter to the universal consensus expecting a bull run in European stocks in 2015.
China will finally receive the long-awaited financial crisis due to a decade of overbuilding. The shadow banking system in China will unravel in a similar pattern as the 2008-2009 US financial crisis.
India experienced a robust move in 2014 but further gains are not expected with the BSE moving sideways through 26K-29K.
The Ebola virus will continue wreaking havoc as the developed nations are stingy with providing funds and personnel to combat the disease. The total deaths will surpass 10K in 2015 (now under 8K). As the year continues, small infection events will occur in Europe, America and other places around the world. Developed nations will have their hands full with a slowing global economy, wars and other problems and remain stingy at snuffing Ebola out which will come back to haunt them as time moves along.
The cyber security stocks such as IMPV, VDSI, PANW, QLYS and HACK will move sideways to sideways lower and not receive a further boost higher despite global cyber attacks increasing around the globe.
Computer users will seek more privacy-protection. The new ‘anti-FB’ Ello social site, secure search engines and SnapChat and Instagram sites will increase in popularity. People will shy away from supplying every little detail of their lives on the internet and instead seek more private alternatives.
Student loan debt problems will surface and a realization hits that the US has a new and serious problem.
As the student debt problem increases, the subprime auto lending problem also surfaces. Auto and financial sectors weaken as two major problems come home to roost; student loan debt and automobile debt.
Global auto sales will be weaker than expected. Luxury car sales will disappoint in 2015.
Young folks will become disillusioned and discouraged with America. The student debt issue will intensify and many young folks will give up as they are now expected to support the older folks with Obamacare but cannot find a job. Young folks will drop-out and tune-in, so to speak, like the 1960’s and 1970’s since they are overwhelmed by the life ahead.
Social unrest and violence will increase all around the world including in Brazil, Nigeria, Russia (to less of an extent since most are employed by Stare-owned enterprises), West Africa, Venezuela, Iran, Saudi Arabia and the Middle East in general due to the ongoing soft oil prices. Governments such as Saudi Arabia will have difficulty placating the masses as budgets are stretched due to the loss in oil revenue.
Social unrest will increase in America. Protests will morph into a collective effort where the same demonstration may contain folks protesting different problems such as police militarization and brutality, racism, Occupy Wall Street and income equality. Even though their causes are different, all protestors will combine under a unified front under the income inequality banner. The middle class and poor, since they do not own stocks, have not benefited from the Federal Reserve easy money policies and instead the rich are now filthy rich. The common folks will rise up in revolt realizing they were sold down the river by the Fed. The distrust in US authority will increase dramatically and the split between the social classes (rich versus poor) will widen. The situation will be exacerbated by the economy weakening.
Attacks on the wealthy population will increase both physically and property-wise. Expensive cars will be keyed with more frequency and tires slashed. Spray painting graffiti on mansions will become more common. The rich will begin seeking gated communities for safety as the separation between rich and poor increases in America and social protests become more violent.
Shopping malls will reinvent themselves since consumer traffic continues to trail off. People are buying more goods on line and visiting the malls less. Malls will begin seducing restaurants to fill the empty spaces available and others will install kiddie parks or other attractions to use the vast real estate space. The social unrest in America will target the malls as key areas for demonstrations much to the chagrin of retail managers trying to keep the malls alive. A few violent events will occur at malls this year.
A cash society will increase in the US. The one-half of America that were abandoned by the Federal Reserve in favor of making the other one-half of America that own stocks wealthy will stretch their family budgets by avoiding paying taxes in every way possible. More people will work “under the table” for cash which will cut the Federal, state and local governments out of tax revenue. Products and services will be exchanged for cash so taxes will not have to be paid. When the economy turns south and folks lose their jobs, the government tax bases will be hit with a double whammy; less revenue from folks out of work and less revenue due to a cash society increasing. Many communities that continue to spend obscene amounts of money on technology and other gadgets and militarization equipment for their local communities will quickly fall into financial trouble.
The housing sector is going to slump and when the realization hits it will feel like a wheel just fell off the economic cart. Housing and automobiles drive the economy and the auto sector will already be in trouble from the subprime car loan problem and over capacity. The housing slump will appear around spring time, usually a busy time of year, but work will be slow in 2015 revealing the weak housing sector. Stocks and indexes such as XHB, LEN, PHM and TOL will move sideways to sideways lower during the year. Chinese and Russian investors and hedge funds have been buying real estate bloating prices into a bubble but they are done buying and the market has no other support. The average family was screwed by the Fed and cannot afford homes at the now lofty prices.
Housing, auto’s and copper will be weak in 2015.
Housing starts will average below one million per month during the year.
A citizen journalist movement continues. Less folks pay attention to the talking head pundits on cable news stations and instead follow blogs, videos and broadcasts on the internet that provide insight faster in real-time. Who needs the news services anymore? There is no integrity since they do not even check their news stories so everyone figures they may as well take their news from TWTR and other news feeds. The news from regular common folks provides greater insight and the large news outlets are prejudiced by their political agendas.
Obamacare will be on the front burner again from springtime forward as the Supreme Court passes down a ruling that should not favor the new Affordable Health Care Act (ACA). President Obama will be forced to deal with Congress rather than avoid any cooperation which is the president’s path for the last six years. Obamacare will be another problem heaped on to the wagon overwhelming the US as the economy weakens.
The US presidential candidates should solidify during 2015 in preparation for the November 2016 election. On the democratic side, Hillary Clinton will probably not run surprising everyone. Andrew Cuomo and Elizabeth Warren may receive lots of attention for the candidacy but the big surprise may be the democrats circling the wagons around Vice President Joe Biden that everyone ignores for now. On the republican side, Paul Ryan, Scott Walker, John Kasich and Ted Cruz may go deep into the race. Jeb Bush will probably bow out despite all the hype that he is a shoe-in. Politicians know the public is sick of the Clinton’s and Bush’s and Jeb Bush knows his chances are better in four or eight years. Mike Huckabee may be a vice presidential candidate. If none of the above clowns are on the tickets, candidates coming out of left field and lesser known figures will fill the spots.
Politics and the stock market are in for a wild and dramatic ride in 2015 with many surprising events occurring in the political and economic arenas; more than in any other time in recent history.
A lock limit down or flash crash event will occur in equities this year on par with the 5/6/10 Flash Crash. Mini-events are now considered common place in markets as HFT robots wreak havoc but a larger event is on the come.
A major geopolitical event/s such as war, terrorism, and/or a pandemic will occur this year. The timing is perfect considering a major stock market selloff is likely. The event will be blamed and cited as the reason for the stock market pull back just like in 2001 when 9-11 was blamed for the stock market drop but in fact the economy and underpinnings of the stock market were far weaker than touted at the time. The war or other event will be blamed for the selloff as a means to protect the Federal Reserve. The Fed will not be blamed even though they are at fault. This is why Greenspan, Bernanke and Yellen are never overly concerned and remain relaxed and calm at all times; they know how the inside baseball game is played and they will always be protected.
Japan’s JGB’s explode higher in yield signaling the BOJ losing control. Japan may be a catalyst to bring the global economy down. JGBS is a potential play.
Protectionism will increase as the slowing global economy causes countries to continue slitting each other’s throats. Tariffs are increasing in solar, steel and wine sectors and will spill over into many other sectors and industries as each nation attempts to protect their own industries. The result is like the Great Depression in the 1930’s where everyone drags each other down the rabbit hole.
Warned of the Impending Dot-Com Bubble 1998-1999; the dot-com bubble popped March 2000.