USAA Monthly: U.S. Stocks Need Clarity on Oil, Global Growth and the Fed

anthony · Jan 30, 2016

Good read in USAA's monthly market analysis ... LINKY

Some highlights:

No bear yet ... "While we agree the old bull is looking a little stooped and frail these days, we still think it may be hasty to say it has morphed into a bear."

What's causing the January volatility? ... "Fear — expressed as heightened volatility — can be attributed to a collection of key uncertainties that are largely interrelated and global in scope." They are:
- Oil: "Stocks will likely remain pressured until oil prices stop falling. When that occurs ... stocks may be positioned to rebound."
- China ... "may drag the rest of the world down into recession, but it's hard for us to see that happening." They cite growth in other sectors (US, Europe) that may offset.
- The Fed: uncertainty exists in how fast Fed will move on short-term interest rates, which contributes to a nervous market. USAA says no reason shown that the Fed will rush this; they'll move slow and not risk undoing all the past work since 2008.
- US Dollar: Huge gains vs. other currencies are based on Fed rate-hike expectations and result is damage to earnings in US MNCs. They don't see the Fed getting aggressive, so dollar's gains should level out, stabilize earnings and revenue for US companies.