In this latest installment of our quarterly report, my colleagues and I share some observations on the first quarter of 2015, offer our outlook for the global economy and markets, and discuss several of the securities we are currently buying: Google (GOOG), Johnson Controls (JCI), and international mutual funds from Dimensional Fund Advisors.
Click here to go to the full report on our website. Following are a few highlights:
- Stocks rose slightly in the first quarter as U.S. Federal Reserve chair Janet Yellen’s remarks about gradual interest rate increases comforted investors, who are adjusting to lower oil prices, a stronger dollar, and mixed economic conditions around the world.
- Whenever the Fed finally raises rates – likely before year-end – we expect the increase to be gradual and believe the U.S. economy will continue to expand.
- The United States is currently the strongest of the major global economies, even though real GDP growth has been limited to 2%-2.5% for several years and is likely to remain in a similar range in 2015.
- The dramatic fall in oil prices – over 50% since last summer – is both good and bad for the U.S. economy but should have a positive impact overall.
- Some of the world’s major economies are not faring as well as the United States and require more stimulus, so central banks abroad are easing rates in Europe, China, and Japan.
- The relative health of the U.S. economy provides select opportunities to make good investments here at home, and Europe and other foreign markets also present pockets of opportunity for disciplined, patient investors.
- For income, we continue to favor utilities, real estate investment trusts, preferred stocks, master limited partnerships, and convertible securities over bonds in the current environment of low interest rates that are likely to rise.
- We remain optimistic that the stock market, bolstered by the economic benefits of lower energy prices and low interest rates, will again provide positive returns in 2015.
Jordan Smyth and the Edgemoor Investment Advisors Team