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14 SMT Magazine • February 2015 principle that dictates the global market—the interplay of supply, demand, price and econom- ics. For the last several years, the U.S. economy was marked by consumer spending that's stuck in the ditch and growth, albeit tepid, being pow- ered by non-import-dependent sectors, such as capital investment in oil and gas exploration. 2015 appears to be a year of change in main driving forces for the U.S. economy by falling energy prices and a stronger dollar. It is also entering into an uncharted territory that unemployment has dropped to around 5.5%, yet the inflation rate stays low (below the Federal Reserve's 2% target). And considering the slower growth in emerging markets, strengthening dol- lar, anticipated low commod- ity prices, not to mention the new force of low oil prices, the inflation outlook is expected to remain low. The Eurozone's recovery continues to be sluggish, fac- ing the danger of deflation. Ja- pan's Abenomics, combining both monetary and fiscal stim- ulus programs, is yet to show its muscle, but, as an oil im- porter, the precipitous oil price plunge may benefit Japan's GDP (reportedly, Japan spends more than 3% of its GDP to pay for imported oil). Overall debt level in developed markets remains high, and the low growth and low inflation will not help reduce debt. On both sides of Atlantic, central banks face tough decisions. Both U.S. and U.K. debate on monetary policy in terms of interest rate (i.e., when to raise, how much and how fast). With low inflation and low growth, a baby step could be most likely. In emerging markets, the lower demand and lower prices of commodities are hurting the countries that produce minerals and metals. The economies of Russia and the Middle East depend on energy prices. Africa, a commodity producer, lives and dies on the swings in prices of raw materials. Some of the BRICS countries, such as Brazil and Russia, will look to meager GDPs compared to recent years. As the BRICS countries constitute 40% of the world's popula- tion, 20% world GDP and 17% world trade, a slow growth in the BRICS does not send good news to the world economy. However, in terms of growth, a couple of brighter spots may start to shine. Indonesia, with more stable political climate and infrastructure, and India, with the pragmatic and flamboy- ant new prime minister, may make better than historically typical contributions to the global growth rate. In corporate America, the several years' rising tide (stim- ulus and low interest rates) has raised all boats in the eq- uity market. S&P is trading at a multiple of 16, above the 10-year average of 14. The re- spective stock prices fluctuate far more than logic can justi- fy. Going into 2015, as corpo- rate austerity cost-cutting has been and should have been done, a new effort to garner top line growth is becoming prevalent, justifiably so—bet- ter products, better services, organic growth and critically thought-out acquisitions. For the companies that have not adroitly carried out the neces- sary cost cutting measures, 2015 will be a much more challenging year. Outside the oil and gas sector, cheap energy prices do not necessarily translate into corporate earn- ings. The stronger dollar and slower emerging market growth will make corporations face a heightened competitive global market and drive harder-to-get earnings. Facing the triple whammy, there are all kinds of potential downside risks, and prudence is im- portant. To mitigate controllable risks, I follow my "5-3 rule" of investments— stay with coun- tries offering the macro-economic and market condition of less than 5% inflation and higher NeW year OuTLOOK: WHaT CaN We eXPeCT IN 2015? continues smt prospeCts & perspeCtives the respective stock prices fluctuate far more than logic can justify. Going into 2015, as corporate austerity cost-cutting has been and should have been done, a new effort to garner top line growth is becoming prevalent, justifiably so—better products, better services, organic growth and critically thought-out acquisitions. " "