I had to do a double-take when I looked at the calendar today and realized that we’ve nearly reached the end of April. It feels like just yesterday when we were ringing in the New Year, but we’re fast approaching the second half of 2015.
Then again, when I stop to think about it, the past four months have been quite busy. Between two earnings seasons, a slew of Fed announcements, several high-profile IPOs, and foreign exchange rate fluctuations to boot, we’ve seen plenty of changes so far this year.
So, as we approach May—and the seasonally slow time of year for the stock market—it’s time to review our 2015 predictions. Today, I’m going to check up on my predictions—and the ones many of you posted to the blog in December—and which have panned out so far, and which should be rethought.
Prediction #1: How High (or Low) Can the S&P500 Go?
The trillion-dollar question, of course, is how the S&P500 will perform in 2015. When I polled many of you back in December, here were the forecasts:
- 54% predicted a 1% to 10% increase.
- 23% predicted an 11% to 20% rally.
- 6% predicted an 11% to 20% plunge.
- 6% predicted a 1% to 10% decline.
- 5% predicted a flat market.
- 4% predicted a surge of 20% or more.
- 2% predicted a plunge of 20% of more.
So the majority of respondents had a bullish forecast—and so did I. Back in December, I stated that I wouldn’t be surprised to see a 20% to 25% rally.
Now, so far, those of you who predicted a 1% to 10% gain appear to be more on the money. At the time of writing this, the S&P 500 has rallied just 2.8% this year. That’s not bad, but the S&P 500 does have a lot of catching up to do in order to live up to my forecast. To be candid, something has weighed on the S&P 500 more than I initially expected (more on that later), so I may need to revise my forecast lower.
Prediction #2: What Will Be the Top Two Sectors in 2015?
While I consider stock picking to be the more successful strategy in this market, it’s important to narrow down which sectors are rising, and which are declining. Back in December, most of you had pretty strong opinions about which were the two strongest sectors:
- 29% voted for Technology.
- 27% voted for Healthcare.
- 12% voted for Energy.
- 12% voted for Financials.
- 9% voted for Consumer Goods.
- 6% voted for Industrials.
- 3% voted for Telecommunication Services.
- 2% voted for Utilities.
- 2% voted for Basic Materials.
I was pleased to see that Healthcare and Technology were the popular choice, because I agreed. And so far, this prediction panned out. This year, the tech-heavy NASDAQ has increased more than 6.9% and the NASDAQ Computer index (IXCO) has gained nearly 4.5%. I currently recommend five tech stocks on my Blue Chip Growth Buy List, and four of the five have rallied in the double-digits since January, with 18%, 24%, 30% and 32% gains, respectively.
But that’s nowhere near the performance of the healthcare sector, especially the high-flying biotechnology industry. The iShares Dow Jones US Healthcare ETF (IYH) has gained more than 10%. Meanwhile, the iShares NADSDAQ Biotech index (IBB) has soared 21%, and the iShares Dow Jones US Pharma Index (IHE) has rallied nearly 19%. In Blue Chip Growth, I’m recommending 11 healthcare stocks. Nine of those have had double-digit rallies; the average year-to-date gain is 18.5%.
As a word of caution, Technology and Healthcare stocks do tend to be more volatile. So whenever you’re adding these stocks, make sure you first run them through Portfolio Grader to see how it measures up in my stock screening tool.
Prediction #3: The Biggest Investing Concern in 2015.
This is perhaps the most interesting question in the original survey. As investors, we are exposed to any number of macroeconomic, regulatory and systemic risks. In December, many of you revealed that these were your largest concerns:
- 39% said you were concerned about when the Fed would raise interest rates.
- 24% said you were concerned about China’s slowing economy.
- 17% said you were concerned about the stronger dollar.
- 7% of you put down other reasons, like U.S. politics as well as geopolitical instability caused by Russia or Iran.
All of these are valid concerns for stock investors, but a few months ago, my main concern was the stronger dollar. Nearly half of the S&P 500’s sales come from outside of the U.S., and the strong dollar is hindering these sales. So, for the first time in a few years, the S&P 500 is expected to see earnings decline in Q1. While a lot can change over the next several months, I expect this to be a key factor in the performance of multinational companies.
I love hearing from you, so in the next month or so, I’ll post another survey to get a pulse on how you feel about the stock market, and where the opportunities and risks will be. In the meantime, I’ll check back in tomorrow with a briefing of the latest economic news.