The global market in the new year is full of headwind and my advice is that well-funded investors (debt-free with cash in hand) must resist the temptation to go on a borrowing spree, with interest rates low.
A majority of investors have been betting on the US dollar exchange rate since the second half of last year. A survey by United States portfolio advisory firm Aksia shows that more than 160 of 187 hedge fund managers it contacted think that the greenback presents the best investment opportunity in 2015.
Many of them are equally optimistic about the US stock market when Europe is being held back by tepid market activity and unfolding geopolitical crises such as the potential deterioration of the Russia-Ukraine conflict. Once again, the US appears to be a safe haven.
Others see falling oil prices as an added incentive for US consumers to spend more.
That said, some economists have warned that consumers may not be willing to spend their savings. When deflation is around the corner, people think the later they buy, the better price they will get.
Also, the impact of oil drilling suspension or production slowdown and the chain effect in related industries should also be taken into consideration.
Hedge fund manager Felix Zulauf reminds us that in the past three-and-a-half years, the US stock market has been gaining and has not dropped more than 10 percent.
When virtually all investors follow a pathological move to invest in the US economy, the situation may foreshadow a slump.
Will 2015 be another banner year for the US stock market? I doubt it.
This article appeared in the Hong Kong Economic Journal on Jan. 20.
Translation by Frank Chen
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