2015 outlook

M

markettimer

I'm expecting the dollar rally will fizzle in 2015. Here is my allocation as we near the end of 2014. Hope not to suffer too much abuse in the months ahead.

Equities (net 30%)
30% Emerging markets equities
30% Developed markets equities
-30% US equities

Commodities (30%)
12% near month WTI futures and oil majors
18% precious metals and mining stocks

Cash (net 10%)
15% Euro
20% Japanese yen
5% Pound sterling
-30% US dollar

Bonds (30%)
20% 30-year US Treasuries
10% Junk bonds
 
Maybe a little OT, but I noticed you don't trust the USD and US stocks (-30% stocks, -30% USD, +15%EUR +20% jpy). I regularly read this estimatation on blogs that talk about USA's overwhelming debt and that its economy goes down.

Being German, I think that's funny. Did you notice how the EUR and JPY (and most other currencies in the world: India, Russia, Australia, NewZealand,...) recently fell dramatically in contrast to the USD? Do you know where the DOW and SP are now in relation to the European and even the Chinese indices?

Honestly, I thought about changing all my EUR to USD, because - if - a western economy will fail, it will surely not be the economy of that country, which holds the world's reserve currency and has the greatest military force in the world.
 
alexkofler said:
Did you notice how the EUR and JPY (and most other currencies in the world: India, Russia, Australia, NewZealand,...) recently fell dramatically in contrast to the USD? Do you know where the DOW and SP are now in relation to the European and even the Chinese indices?
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Yeah, have noticed the recent dollar outperformance. These positions were chosen after the dollar rally. US stocks are expensive relative to the rest of the world. USD is up considerably since summer, JPY is especially cheap on a REER basis. I'm not forecasting doom and gloom for the US economy, just tilting away from it at a time of perceived overvaluation.
 
I think your dollar fizzle idea is right but somewhat early. You probably face some short term pain over the next several weeks.
 
USD seems to be amplified on account of expectations of rising US rates, foreign central bank monetary policies notwithstanding. If you're betting against USD dollar appreciation, would you then effectively be betting on continued ZIRP US? Or the ECB's inability to inject liquidity and the BOJ's discontinuation of their ZIRP?
 
Dear markettimer,

Over next 12 months period atleast play with the trend. Dollar will be getting stronger for all the reasons mentioned by EXavier. Also, In that addition the Crude Prices is expected to see the downward pressure in coming period. so, reduce the exposure to that also.It will be best if you look for the USD Stocks like Tech Stocks which has net payables of there cost in Dollars (in other words which dominantly outsources the work and pays the bills in Dollars) or stocks which are belonging to FMCG,Retail and others. The Economic data are showing some good signs in these sector.It will be rather good to stay aside from Energy/Commodity Stocks.


Regards,
Nik
 
Markettimer,

Owing to the fact that I am, much like you I gather, a contrarian, this sounds good to me. One adjustment that I would consider involves the Japanese yen. Instead of being long JPY, I prefer to be short the Nikkei (NKD) in USD. I think that if the yen rallies, the decline in the Nikkei is going to be many multiples of the yen appreciation.

Also, junk bonds may be problematic. I know that is a very mainstream story right now (lower oil prices = junk distress), but I think it has some legs. For the long oil trade, I would use short puts or long futures and short calls to take advantage of the huge spike in vol.

Good luck in 2015.
 
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