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Better economic growth and higher corporate earnings should support higher stock prices. However, oil prices and central banks can
still wreak havoc with market sentiment and valuations.
Regarding crude oil, we believe production and
consumption should reach equilibrium this year.
Crude inventories are beginning to decline as re-
fineries are increasing production of gasoline in
advance of the summer driving season in the
northern hemisphere. We believe crude oil hit its
cycle low at $26 in January. While prices will
remain volatile, West Texas crude could reach
$50 this year which would be highly supportive of
risk asset prices.
Central banks are playing a game of tug-of-war
with one another in attempting to influence their
own economies without impacting their global
competitiveness. The European Central Bank (ECB) and the Bank of Japan (BOJ) are aggressively lowering rates to stimulate their
economies but have seen their currencies appreciate. The Federal Reserve is cautiously raising rates, restrained – it avers – by condi-
tions outside the US. Market reaction to its actions and statements earlier this year is likely a significant reason as well. The Fed
should be raising rates given domestic economic conditions. The disconnect is evident in comparing Cornerstone Macro’s leading
economic indicator (CSMLEI) and the US ten year Treasury yield below. This disconnect is further exacerbated by the Bank of Ja-
pan and European Central Bank pursuing negative interest rates and aggressive quantitative easing.
Source: IEA, TPH
Source: Cornerstone Macro
Regarding crude oil, we believe production and consumption should reach equilibrium this year. Crude inventories are beginning to decline as refineries are increasing production
of gasoline in advance of the summer driving season in the northern hemisphere.
This year started with a great number of uncertainties. The major ones are becoming clearer. Most importantly, global growth is
clearly picking up and is likely sustainable for another two to three years. The direction of US Federal Reserve-set interest rates is
still higher but the pace and magnitude more gradual. China’s transition from infrastructure to consumption is progressing but there
will be bumps along the way. Numerous geopolitical uncertainties remain: the UK exiting the European Union, ISIS terrorism here
and abroad, and refugee migration into Europe to name a few. Notwithstanding, looking at all factors in aggregate, the environment
is sufficiently positive to support improving returns on risk assets in the year ahead.
As always, if there are any questions, please call.
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The information in this report is deemed to be reliable but has not been independently verified. Some of the conclusions in this report are intended to be generali-
zations. The specific circumstances of an individual’s situation may require advice that is different from that reflected in this report. Furthermore, the advice
reflected in this report is based on our opinion, and our opinion may change as new information becomes available.
Nothing in this presentation should be construed as an offer to sell or a solicitation of an offer to buy any securities. You should read the prospectus or offering
memo before making any investment. You are solely responsible for any decision to invest in a private offering.
The investment recommendations contained in this document may not prove to be profitable, and the actual performance of any investment may not be as favora-
ble as the expectations that are expressed in this document. There is no guarantee that the past performance of any investment will continue in the future.
About Ballentine Partners
Ballentine Partners is an independent wealth management firm providing comprehensive investment and family office services to
wealthy families and entrepreneurs. The firm was one of the first to deliver independent, objective, and comprehensive financial ad-
vice for wealthy families 30 years ago, and continues to be a thought leader in the field. Ballentine’s clients require comprehensive,
integrated, and objective advice. The firm advises on more than $5.9b in assets under management (as of 12/31/2015). Ballentine
scales its services to meet the breadth of clients’ needs, whether it’s investment management and planning for an entrepreneur or a full
suite of family office services for a multigenerational family, including family meetings and education, philanthropic advising, and