news.goldseek.com / By Frank Holmes / 20 May 2014
Global synchronized growth, as measured by the Global Purchasing Managers’ Index (PMI), remained stable or positive for the past 12 months until Japan reversed the momentum in April with a precipitous drop in its PMI. China is contributing modest growth but, fortunately, the U.S. and Europe are rebounding. This lack of consistent global momentum has created a short-term, volatile, hot and cold, stop and go sentiment. Global real GDP growth peaked in 2010 at 5.2 percent, then slowed for the next three years, to 3 percent. Global growth in 2014 is likely to accelerate, for the first time in four years, to 3.5 percent, according to ISI. This is constructive news for commodities.
Brian Hicks and I co-manage the Global Resources Fund (PSPFX) using a model that focuses on companies demonstrating robust fundamentals in sectors showing strength. I’ve asked Brian to share his thoughts on the opportunities we see in today’s market.
Q: We’ve seen strength in the major oil companies, service and equipment companies, oil and gas exploration and production (E&P) companies, chemical companies and refiners. What’s behind the strength?
A: The major oil companies have benefited from higher Brent pricing and cheap relative valuation to energy and the broader market. E&P stocks are especially solid because the price of oil is strong. The shale revolution has been a transformative factor for a lot of companies in this space, creating very strong growth in production. Chemical companies and refiners are downstream beneficiaries of the shale play as relatively inexpensive oil and natural gas priceslower their main input cost in the manufacturing of chemicals and refined petroleum products. Because of this competitive advantage in the U.S., we’re seeing chemical companies moving back to the states and creating jobs. Global demand is also increasing for oil and chemicals.
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Global synchronized growth, as measured by the Global Purchasing Managers’ Index (PMI), remained stable or positive for the past 12 months until Japan reversed the momentum in April with a precipitous drop in its PMI. China is contributing modest growth but, fortunately, the U.S. and Europe are rebounding. This lack of consistent global momentum has created a short-term, volatile, hot and cold, stop and go sentiment. Global real GDP growth peaked in 2010 at 5.2 percent, then slowed for the next three years, to 3 percent. Global growth in 2014 is likely to accelerate, for the first time in four years, to 3.5 percent, according to ISI. This is constructive news for commodities.
Brian Hicks and I co-manage the Global Resources Fund (PSPFX) using a model that focuses on companies demonstrating robust fundamentals in sectors showing strength. I’ve asked Brian to share his thoughts on the opportunities we see in today’s market.
Q: We’ve seen strength in the major oil companies, service and equipment companies, oil and gas exploration and production (E&P) companies, chemical companies and refiners. What’s behind the strength?
A: The major oil companies have benefited from higher Brent pricing and cheap relative valuation to energy and the broader market. E&P stocks are especially solid because the price of oil is strong. The shale revolution has been a transformative factor for a lot of companies in this space, creating very strong growth in production. Chemical companies and refiners are downstream beneficiaries of the shale play as relatively inexpensive oil and natural gas priceslower their main input cost in the manufacturing of chemicals and refined petroleum products. Because of this competitive advantage in the U.S., we’re seeing chemical companies moving back to the states and creating jobs. Global demand is also increasing for oil and chemicals.
READ MORE
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