I'd also like to take this opportunity to thank the good folks at Investing.com for asking me to participate and share my views, not only on this topic, but also in all my other articles that they've published over the past several years...it's been a privilege.
Good luck to all next year!
* For your easy reference, I've re-printed my article, as follows...
Strawberry Blonde: Shift Into 'Offensive' Sectors
As we approach the end of 2014, we can see from the below Year-to-date percentage gained/lost graph of the Major Sectors that markets have favoured the "defensive" sectors (Consumer Staples, Healthcare, Utilities) plus Financials and Technology, while Housing has taken a back seat this year. It's my opinion that we may see a slight shift from, say, February until May of 2015, and a rotation into a more "offensive" approach (into Cyclicals, Industrials, Materials, Consumer Staples, and Housing) if (and only if) market participants are willing to assume more risk, and if Oil doesn't continue to slide down to or below $50.00. If we start to see more major selling in Oil for any sustained period of time, then I believe we'll likely see a major pullback occur in the equity markets...particularly, if the Fed hints at raising interest rates in mid-2015 or thereabouts.
Otherwise, if Oil stabilizes around 60.00-75.00, we may see a short rebound in the accumulation of the riskier sectors, until, say, May or June. This may involve some profit-taking in the above-noted "defensive" sectors, although, these may continue to outperform again, as they have this year. It really depends on the bottom-line forecasts and targets for overall percentage gains from equity markets to meet the needs of the major institutions and their clients for 2015.
However, I also believe that any further advance in U.S. equities beyond their current levels is dependent on further sustained strengthening of Japan's Nikkei Index, Europe, Brazil, China, Lumber, Copper, Housing, and the Russell 2000 Small-Cap Index. Likely, the US dollar will continue to strengthen if those markets (and those countries' economies) continue to show weakness. Links to my previous posts on these markets can be seen in my latest post here for further explanation.
Year-to-date, the SPX has gained 8.33%, as shown on the percentage gained/lost graph of the Major Indices, below. I think we'll be lucky to see half that increase in 2015 (say, a total of 4% for 2015), as I believe market volatility will increase and markets will consolidate in large trading ranges for longer periods of time in between moves, especially if we see a softening in the U.S. labour markets and wages.
