What’s Ahead for 2015? (Last of a Series)

As oil prices continue to drop, taking other asset values with them, capital markets are beginning the new year sorting through what this all means for them.

In high yield land, while secondary prices for energy credits took it on the chin in early December, the overall theme is “recovery.” As junk guru Martin Fridson points out in an S&P note yesterday, energy-related issues were the best performing of all industry sectors for the latter half of the month.

This schizophrenic behavior is reflected in broader equity indices. The Dow rose almost 1000 points from December 16 (17,068) to December 26 (18,054), since falling off a bit. Investor sentiment toggles back and forth between “Consumers will carry us through” and “Europe will drag us down.”

Even the best and brightest seem torn. Byron Wien, in his 30th annual list of predicted surprises for the year, says “…the momentum of the economy has begun to flag and a short-term slowdown has started,” yet two paragraphs later forecasts: “A growing economy, fueled by housing and capital spending and favorable earnings, enables the S&P 500 to increase 15% during the year…” [link]