tv Nightly Business Report PBS January 1, 2015 7:00pm-7:31pm EST
this is "nightly business report." >> happy new year everyone. welcome to this special holiday edition of "nightly business report." i'm tyler mathisen. 2015 is here. for many it's a time filled with resolutions for investors, perhaps even some financial resolutions and the best way to fulfill those promises we all make to ourselves is to focus on the year ahead starting now. tonight, we will bring you the outlook for 2015. reporters highlight the key things to watch in some of the biggest areas in business from the economy to energy and of course the stock market and that is where we begin. some say 2014 was a turning point for the economy and the job market. they both saw solid gains and the growth engine shifted into a higher gear.
part of that was driven by lower energy prices which puts more money in the hands of consumers and both the economy and energy had a big impact on the stock market. so what's in store for the next 12 months? jackie deangelis reports on energy. bob pisani looks ahead at the stock market and first, steve liesman on his outlook for the economy. >> reporter: 2015 will be a year with big central banks around the world pulling in opposite directions. hopefully, their economies all going the same way, that is, up. the u.s. federal reserve looks likely to hike interest rates, the first rate hike in 9 years and look for it in the summer. the fed won't be aggressive about raising rates. the rates could end around 1% from the current level of 0%. look for the european central bank for a quantitative easing program to buy sovereign bonds. should help stabilize the euro zone's economy if not propel
growth and japan should stay the course with wide open monetary policy. as for growth in the u.s. the positive effects of lower oil prices should offset the marginally negative effects of higher rates and then some. wage growth should finally come in what should be one of the biggest stories in 2015 wages should begin rising meaningfully and the middle class will be able to feel the positive effects of the postcrisis recovery. >> energy prices began a wild ride in 2014 increase north american supply coupled with waning global demand pushing prices of domestic and international crude significantly under $100 a barrel. here are three predictions in energy for 2015. first, oil prices will bottom around $50. with the u.s. producing more than 9 million barrels of crude per day and opec putting out 30 million, prices continue to decline in 2015 and producers will sacrifice margins to hold on to market share.
low oil prices will take time to trickle in to the economy but will give markets a boost. that will spur demand which will then help prices rebound. second opec will lose influence. within the first half of the year opec will be forced to cut production to help stabilize the market. key member saudi arabia has more flexibility on pricing than other members like venezuela and ecuador ecuador. opec's influence will diminish. third, stocks of the u.s. producers see some volatility. in an environment where prices move lower, producers like exxon, chevron and hess will continue to feel pain. they'll manage costs in the face of declining price is but won't be recognized by investors. after apple begins to rebound, energy will be loved again. >> reporter: russia will be an even bigger problem next year. though europe will surprise and google gets serious in its fight with apple. here are three predictions for 2015 boring they're not.
first, russia defaults on its debt. russian ruble hits new lows against the dollar. oil dropped 40%. crude oil and petroleum products are half of russia's export revenues. how will they pay for imports? they will default on their debt. second the european stock market outperforms the u.s. stock market. no recession next year in core europe. the euro zone is stuck in a long-term and no growth environment but the core countries will not sink into a recession. the euro will remain weak boosting trade. after a year when expectations would constantly revise downward european corporate earnings will begin turning around. deflation will remain an issue. third, google buys paypal. paypal is scheduled to be spun off from ebay sometime in 2015. it won't happen. google will bye paypal and combine with google wallet to ward off apple pay.
>> two guests tonight say 2015 could be another happy new year for both the economy and stocks. please welcome josh fine man, chief global at doica and wonder lick securities. thank you for joining us. happy new year to both of you. josh let me just begin with you. you heard steve liesman's thoughts about the economy. what is your outlook for u.s. economic growth next year? and what could make it either much better or much worse than your base case? >> i'm pretty optimistic. i think that the economy can grow 3%. maybe a little more. kind of what we've been averaging better than the last year and a half or so. i think there are two forces behind that. one is the, a lot of the post-bubble head wind that we're restraining the recovery overhaul. credit restraint, government retrenchment. a lot of the stuff is faded. the other is the decline in oil prices giving a nice boost to
household purchasing power. those things i think can help us stay in this higher gear and maybe even shift a little bit higher. >> let me turn to art. let's ask if you agree with basically josh's forecast. at the backdrop for u.s. stocks will be pretty good. >> i think josh has it exactly right. when you look at 2015 you're going to be looking at a time frame to have three significant tail winds and all of them positive for u.s. markets. first and foremost we have rising labor. so the more people working, the more money they have to spend. you've got lower energy prices. so you've got more discretionary spending power and then the highest level of consumer confidence we've seen since 2007. if you combine those with the divergent monetary policy that will tighten in 2015 the rest of the world will continue to ease. we'll certainly continue to strengthen the dollar strong dollar is going to attract global capital into u.s. markets. i think we've got significant head winds on tail winds heading into the market for 2015.
>> josh i don't want to be a downer on new year's day, but is there anything you see on the horizon that could throw cold water on your forecast? >> sure there is some risks. a lot of them are outside the u.s. you know we have sluggish growth in a lot of parts of the world and, you know, there's a chance that that stays that way. also the stronger dollar has a negative impact on u.s. exporters. the outlook for exporters is a little bit negative and the oil price decline, while beneficial certainly to the economy as a whole, there are pockets of the economy that, you know might not benefit from that. particularly the oil exploration sectors. >> let's talk about where we might end the year with respect to the s&p 500. what kind of year is it likely to be? and what sectors are likely to outperform? >> well tyler, i think the s&p 500 and not in a straight line but will certainly earn something like $127 and if you put a historic multiple on that, you get to about 2225.
market could be up to 9% on the basis. and 1% dividend on that. a very good return. i think the three drivers there, as we spoke to are certainly going to be, you know the tail winds of the economy. high level of employment. the consumer that's confident. low energy prices. i think the sectors you want to look at because of that is consumer facing. anything that faces the consumer is probably doing very well. i think you want to look at technology. technology i think, is going to have a significant year. we're going to see a lot of mma activity and avenues of revenue growth. regional banks do well. we see higher interest rates and banks make more in a high interest rate environment. second half of the year you look at reasonable banks to do well. >> europe you heard bob pisani bet europe stocks would outperform ours. would you agree? >> i would love to see monetary and structurally. they can make a couple tweaks to
the way they run business over there that would be a significant benefit and the multiples trading at right now in 2015 a lot lower than the united states but they're for a reason. so a pretty good year to make changes. >> josh i didn't hear you mention interest rates as you talked about the economy in 2015. did they not matter? we've heard about the fed likely going to be patient in raising interest rates. what do you think the trajectory is likely to be and will it dampen the economy and chill stock investors? >> i don't think so. i mean i think that we just had a 6th anniversary of zero interest rates. i don't think we'll have a 7th anniversary. i think economic conditions will probably be such that feds begin to raise rates, i agree, but i think it's going to be a very shallow trajectory. not anything that would imperil the recovery. the last thing the fed wants to do is take chances with the recovery. i think forces latitude to be
patient. i don't see interest rates spoiling the party. >> thank you very much. art, you as well. of deutsche assets. the two sectors with most influence are technology and financials because they're the two heaviest weighted groups in the s&p 500. and both of them perform pretty well in 2014. but what are the key things to watch in the months ahead? kayla tausche with the look at the financial sector but first, here's josh lipton on tech. >> reporter: consumers can never own enough gadgets and tech companies will keep pushing their latest products to them in 2015 but not every tech toy will fly off the shelves. here are three predictions. first, the crowded market for wearables will get smaller. sit bit and jawbone are now household names and the launch of apple watch next year will make a big splash in the wearable space. is there really enough demand
for so many products that often overlap? expect to see consolidation in this space. job own, for example, talked about as a takeout target. 2015 could be the year it gets bought. second go pro goes drone. the consumer drone market is blowing up. and go pro is taking notice. their reports that the camera maker will enter the space and while goe pro isn't confirming these reports, it isn't denying them either. expect the camera maker to move into drones and drive demand for this hobby even higher. third, more trouble for tablets. tablets are under pressure as consumers opt for smartphones with bigger displays and so-called fab lets. the phone tablet hybrids. expect the pressure to continue in 2015 with a category suffering a slowdown. the exception? apple's ipads will best expectations as the tech titan stakes out a bigger role in the
enterprise space. the news for banks this year animal spirits quiet in the face of rigid regulation with tech companies encroaching on their turf. banks trying to protect their core business model. taking deposits and lending money. but 2015 will bring some challenges. first, local shareholders. investors and wait stocks waited too long for businesses to improve. banks see scant return on aseths and investors scant returns on investment. regulation only making it costlier to be a bank with doubts surfacing on whether bigger is in fact better. expect backlash and more activism on buybacks dividends, governance and weather to just break up. second mid cap mergers. slowly but surely banks of a certain size are tiptoeing towards deals again. the sweet spot for
consolidation, banks with less than $50 billion in assets. analysts are watching comerica. and third, silicon valley goes to washington. wall street admits losing grounded on technologies but said the real threat exists without a government green light. look for players like paypal google and apple to explore a move in that direction. still ahead from the skies to the roads, airlines are coming off a record year and automakers saw a surge in sales. will the same be true over the coming months? but first, we had some market pros what they're wishing for in 2015. >> my wish for 2015 is that the u.s. economy gets back to full employment so all the people who want the job get the job and we see bigger pay increases for everyone else. >> my 2015 wish is that we work further and make further progress on peace on earth,
goodwill demand and we have a lot of ill will out there. we have a lot of secular kind of things. we have tribal things. we have religious fights. we have battles going on and people being terribly badly hurt. let's see if we can't build a more peaceful world in 2015. >> my 2015 wish for the economy is that republicans and democrats come together and initiate an investment program, infrastructure-related capital intense-related. this company needs to invest in these things as opposed to consumption. auto dealerships, rising consumer confidence. helped the airlines sell tickets and the automakers sell more cars. so should investors expect more the same in 2015? philip lebeau takes a look. >> reporter: record auto sales? probably not in 2015. but the industry should push sales close to or above 17
million vehicles for the first time since 2001. here are three things to expect as sales surge. first, cheap gas. the national average is now well under $3 a gallon and most analysts believe relatively cheap gas will be with us for much of next year. how low could it go? the energy department predicts a national average of $2.94 a gallon but even veterans who track gas prices admit it could wind up much lower than that. low gas prices means you can expect another big year for suvs. in 2015 suvs and crossovers will stay red hot. partially because several new utility vehicles will hit showrooms and stir the market. at the same time fuel efficiency still attracts buyers. even with low prices at the pump and the newest suvs are getting better mileage than ever before. finally, the crossover to watch next year is tesla's model s.
the crossover is set to roll out the middle of next year. will it be successful as the model s? can tesla crank out one model to two and will 'lan attract as many high end buyers if the world is running on cheaper gas? talk about soaring higher airlines have seen little turbulence while ranking up record earnings. in 2015 look for the airlines to stay in the sweet spot for lifting profits and returns for investors. first, low jet fuel costs are here for a while. that will boost profits in the first quarter. when airlines traditionally see their weakest results. but how much of the low fuel cost trade is already built into the recent surge for airline stocks? another thing you can expect next year packed planes. airlines have been remarkably disciplined not adding too many new flights. they're also cramming more seats into the current planes.
jet blue will continue that into 2015. passengers rumbled but still flying. big change next year is with frequent flyer programs. it will be tough for casual flyers to rack up points but high end travelers love that many airlines including delta and united are moving to programs where frequent flyer miles based on how much you pay for a ticket. if you don't fly much don't expect much in return. >> now to the defense industry which saw a lot of change in 2014 including the resignation of the man at the top, chuck hagel, secretary of defense. will new leadership shift the industry's focus in 2015? jane wells has the defense outlook for the year ahead. >> reporter: spending cuts? what spending cuts? pentagon spending hiked to a five year high as the islamic state became america's latest
threat. in 2015 we have a republican controlled congress and new defense secretary. here are three predictions. first, hack attack. america runs on the internet and it seems everyone from china to syria is hacking into our computer network. the pentagon boosted the cyber security spending but expect more problems than solutions in 2015. more attacks as defense companies try to figure out what tools are needed and if they even have them. second drone wars. in 2015 growth and unmanned aircrafts will explode on the commercial side and establish defense players like boeing lock i can, general atomic lose ground to amazon and google. and third, substitutes. russians casted a new missile from a submarine but fleet, especially ohio supposed to carry most of the nuclear arsenal. the cost to replace them though which could benefit general
dynamics is astronomical and 2015 see the pentagon paying out of the navy budget in a fight over money that could go nuclear. coming up housing and health care are two big spenss for many household. what's in store for those in the new year? and next the cameras out to find out what's at the top of your wish list for 2015. >> i definitely want to see student loans being improved because i have loans to pay back. i'm in college. that's just something i feel is important. >> i would like to see much more collaboration between the two parties. i'd like to see the democrats and the republicans get along together. otherwise, you're not making any progress. >> on the wish list i'd like to see more people have good jobs that they can believe in and depend on and not worry about. 2014 was a tough year for retailers, consumers picky. stores hacked.
traditional retailers like radio shack and sears forced to close locations. what should investors watch in 2015? courtney reagan reports. >> reporter: retail saw a lot of changes in 2014 and the headlines won't end when the calendar flips to 2015. here are three predictions for next year. first, sears stays. for now. while sears won't see resurgence resurgence it will be in business in 2015. although 2016 could be a different story. majority shareholder and ceo eddie lam pert undertaking financial engineering exercises to squeeze out the retailer's valuable assets while largely neglecting the retail business itself. it's not a sustainable way to run a business but lam pert coming out the biggest financial winner in the end anyway. american eagle looking for new ceos. not only will they stay
unfulfilled for a while but for vacancyies through the year. mobile changed how we shop and where we do it. ceo caliber candidate for fresh retail strategies and knowledge in tech continue to be a difficult task. third, the rise of the cmo. as targeted marketing and personalized shopping officer growed importance so will the role of a chief marketing officer. in 2014 the cmo secures a seat at the head table. the industry that saw some of the biggest changes in 2014 was health care from big mergers like big pharma and biotech. bigger changes ahead? meg terrelle looks and bertha coombs tackles health care. >> reporter: washington looms large over health care in 2015 with congress and the supreme court set to revisit health reform. repeal and replace obamacare?
it won't happen. the republican majority and congress will revise parts of the health reform law, likely eliminating the 2.3% tax on medical advices. but kick in for employees 40 hours a week. supreme court won't do obamacare either. there will be dram in king vs. burwell challenging subsidies on healthcare.gov. plans unstated exchanges. ruling against the administration could gut the enrollment. expect to find middle ground between the spirit and the letter of the law. >> in the big push towards consumer related health care established players and new entrants are going to push technology at us making 2015 the year of the wearable health gadget. even apple's watch will struggle to dominate in a crowded market.
health i.p. infrastructure players will be the real winners with increasing demand on data. >> if you wanted growth in 2015 you almost had to be in biotech and pharma. stocks in the sector continue their run returning more than double the s&p 500. here's three predictions for 2015. first, drug price wars. it may be the biggest threat to big pharma's valuations. pressure on escalating drug prices. so far mostly from health insurers and patient advocacy groups. in 2015 we could see price wars among drug makers themselves. specifically keep an eye on hepatitis c when science faces new competition. and second immew no therapy. new cancer drugs harness the immune system to fight cancer. 2015 will be the year immuneo therapy is launchable. two new records, to novartis and
kite for a new therapy called kart to market. 2014 was a banner year for health care some of the biggest potential deals mostly driven by tax considerations fell through. as cash flushed bigger companies continue to look for growth expect biotech, promising products particularly in cancer and rare diseases to be targeted. analysts watch company like air yad, medvation. housing, home price gains slowed last year. mortgage rates stayed near lows. diana olick with trends at the housing in 2015. >> reporter: the housing recovery took a step backwards in 2014 as home prices rose too far, too fast. and incomes couldn't keep up. now as employment improves and price gains ease 2015 is looking brighter. but perhaps even bumpier. as buyers run head on into
rising rates. here are three predictions. there will be more houses. there has to be. as household formation improves the builders look at more developed lots easier credit and a better labor market. i'm going with 740,000 single family housing starts in 2015 and a little cooling on all that rental apartment construction. mortgage rates have nowhere to go but up. predicted rates rise this year and we were wrong. but with the fed pulling away from mortgage buying and an improving u.s. economy, interest rates have to break out of the current lows. it won't happen immediately but we should see the average rate on the 30 year fixed edging closer to 5% by the end of next year. home prices have to cool off. sticker shock sank the market in 2014. home prices have jumped double digits and pay wasn't good. slower sales and more inventory
of existing homes added to keep price gains tight. we could see a few monlts in the negatives but for the year a gain nationally of i'm saying 2 to 3%. >> that folks, is "nightly business report" for the new year. thanks for joining us. i'm tyler mathisen. happy new year, everybody and we will see you right back here tomorrow night.
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