By James Dondero | January 9, 2015
- While concerns around deflation continue to dominate market headlines, oil may finally be near a short term bottom, supporting our belief that an oversold bounce in commodities may occur in January.
- Hard assets continue to look appealing with regard to deflation. Over the next few years, scarcity issues due to expected capacity changes in utility-based organizations like the Electric Reliability Council of Texas (ERCOT) could lead to a potential upside for companies like TXU and NRG.
- Long term yields continue to stair-step lower and the ratio of high-yield/treasury bonds continues its downtrend. Rates in the US are still relatively favorable in comparison to those in other developed countries, supporting our bullish outlooks for both US bonds and the dollar.
- Within the US stock market, it remains a mixed picture. While many of the broad market averages remain within their recent trading ranges, the Volatility Index (VIX) is clearly highlighting the increase in daily volatility — an environment which suggests to us that both bulls and bears have an opportunity to capture alpha.
- Overseas markets continue to be the primary concern for the US. While those in Asia still retain a healthier outlook overall, last week did see significant weakness in countries such as Spain & Greece.