With many favorable tailwinds, these two sectors should post large gains in the New Year. Bret Jensen has three favorite stocks in these sectors that he personally owns and wants to share with you today.
It is hard to believe 2015 is already coming to a close. It was a forgettable year as far as the economy and the markets were concerned. Major indices are largely flat as we turn the page on 2015. Without the outstanding performance turned in by the so-called FANG (Facebook, Amazon, Netflix, Google) stocks, most of these indexes would be significantly underwater. Roughly two-thirds of the largest 3,000 stocks in the market are currently off 15% or more off their yearly highs.
The global economy has not been anything to write home about this year as well. Worldwide growth is looking like it will clock in right at a three percent gain for 2015. This is the weakest global demand since the world started to emerge from the Great Recession in 2009. Worldwide activity is projected to tick up in 2016, but not by much. The domestic economy continues to muddle along at just over two percent growth for the year, about the average throughout what has been the weakest post-war recovery on record.
Manufacturing outside of auto production has been very punk this year and is hovering right at contractionary levels. The collapse of energy prices has slashed demand from that sector of the economy in 2015, a trend that will likely carry over into 2016 as energy producers continue to slash their capital budgets. The implosion of other commodities like iron and copper has crushed demand for mining equipment and hurt several manufacturers like Caterpillar (NYSE: CAT) and Joy Global (NYSE: JOY). The strong dollar and tepid global demand have negatively impacted the vast majority of American manufacturers.
These headwinds should persist into the New Year. The one area of manufacturing I continue to like is auto production. 2015 will go into the books as one for record vehicle production with some 18 million vehicles produced. Given the average age of a vehicle on the road is over a decade, plus solid job growth and low financing rate 2016 will be another good year for domestic auto sales.
