The new year will no doubt look a lot different to 2014, but interest rates will continue to dominate investor risk appetite

Happy New Year traders and investors, the team at Rivkin wishes you the best of health and prosperity in 2015. This morning we are going to highlight that while a lot changed in 2014, the real stand-out themes that dominated markets didn't manage to alter the state of global interest rate policy much, and so as the 2015 calendar year begins, the hunt for yield remains in place. Transposed upon a layer of relatively healthy corporate earnings across US and Australian equity markets (the big caveat being the resources sector), there are many upbeat consensus forecasts around with regard to where equity index levels might finish in 12 months time. We don't indulge in this guessing game, but we do agree that there remains a healthy appetite to own shares in companies as a means to seeking risk-adjusted returns in a low-interest-rate world, and thus we also hope to see some better gains locally than the ~60 point or one percent gain that the ASX 200 managed in 2014. While the ASX 200 accumulation index came in at +5.6%, neither the index nor the index including dividends put in noteworthy gains.

Today's charts--all 31 December 2013 to date--are nothing out of the ordinary, but serve to quickly get past the year in review before we'll begin to explore new themes from tomorrow onward:

  • Chart 1 shows the S&P 500 gain (black) burying the performance of Germany's DAX (blue) and the ASX 200 (orange)
  • Chart 2 shows the 2014 effect of the US dollar strengthening theme, which devalued the AUDUSD (orange), devalued the yen (blue) and manifested in a much stronger US dollar index (black), which has the potential to continue trending higher, but not without many consequences - we'll talk more about this in coming weeks if it plays out
  • Chart 3 shows the move in WTI crude oil, from highs around US$107 in June to just below US$53 today - while the drivers behind this move remain alive and well, both WTI and Brent crude seem to be exhibiting some consolidation at current levels 

On Friday 1 January Rivkin issued its 10-stock Blue Chip Portfolio to its Rivkin Local members, a strategy that blends the high theoretical yields and price recovery potential of bombed out blue chips with some of the more solid names that enjoy high payout consistency. This strategy, instigated in 2008, continues to create fantastic performance for members, despite there being so many buyers for high-yield stocks, which invariably keeps a lid on yields as prices rise and dividends remain relatively unchanged. This strategy now includes Woodside Petroleum (WPL) and Fortescue Metals (FMG), due price falls associated with the crude oil and iron ore price drops. As and when volatility steps up among ASX 50 constituents, we'll no doubt see a few interesting names come into this strategy that will fall into the bombed-out blue chip category - these are two of them.


Today’s charts are taken from the Rivkin Trader platform. 30,000 global instruments available to trade including FX, commodities, index, ETFs and international shares. Trade Australian share CFDs from just $8 or 0.10%. Click here or phone 1300 748 546 to get your free $100,000 demo account.

Upcoming economic announcements: German retail sales out at 9:30am, third-party Eurozone investor confidence out at 8:30pm, German CPI out at midnight, all Sydney time.

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