FYI: As we approach 2015, two standout sectors remain overweight in our US ETF (exchange-traded fund) portfolios. They are the Utilities and the Transportation sectors. Both sectors are largely domestic American businesses. (Most of the companies in the ETFs that we select are not dependent on currency exchange rates to either beef up or reduce their earnings.) Both sectors focus on the pace of the US economic recovery. Each sector has limited (but some) exposure to the geopolitically troubled regions of the world. Each sector is helped by persistently low US oil prices.
Regards,
Ted
http://www.ritholtz.com/blog/2014/12/two-sectors-two-observations/print/
Comments
Of note in this write is (I selected particular portions):
"The Transportation sector benefits from lower energy prices in a different way. The obvious benefit is lower fuel costs. Air and rail travel, truck transport, and other means of US transportation also benefit when the US economy picks up. In 2015, the US economy is going to get a boost from low energy prices.
Offsetting that hit is the positive impact the lower oil price will have on the US economy. We think about it like this. Everything that originates with oil is cheaper now. All of the derivative products that come from oil are cheaper. Every household budget is improved by the drop in the cost of fuel. Various estimates of the positive impact that lower energy prices will have on the US economy are centered at about $450 billion."
>>>My take is only the direct reduction of gasoline prices will have an impact upon the consumer. Companies that benefit from all things related to lower energy costs will not pass those savings to the consumer. Why would or should they?
"If we are close to right, and if these estimates are within a 20% to 30% margin of error, 2015 will deliver accelerating growth in the US. We will enjoy continuing low interest rates as the Fed gradually normalizes policy. Low inflation lends additional confidence to the forecast, because energy price pressures are removed. The US stock market is likely to reflect these trends."
>>>Overall, yes. U.S. centric will likely remain to have the most potential for reduced risk returns relative to global otherwise.
So, tis all IMO.
Take care,
Catch
Lower commodity (input costs) should create the economic environment to "finally" prompt the Fed to raise interest rates which "eventually" will provide the necessary inflation to raise commodities (input costs). Buying commodities at these price (they may drop further) should serve as a inflation hedge in a well diversified portfolio, especially commodities we use daily (energy and food).
For investors, these fits and starts will test one's investment strategies. I'm trying to position my portfolio so I can stay on the back of my bucking bronco.
Disclosure: My portfolio might better be described as "my little pony".