Norbert Mach's Ben Chaplin Reviews the First Six Months of 2015

Vienna, Austria, July 10, 2015 (Newswire.com) - The halfway point of the year is a prime time to take a step back from portfolios and check the pulse of the broader economy. Ben Chaplin, Head of Institutional Trading at Norbert Mach in Vienna did just that:

The main takeaway: In 2015, the U.S. will continue to be a solid growth engine.

Earnings and economic growth faced a hiccup in the face of a higher U.S. dollar and lower energy prices, but the labor market has been chugging along anyway. Unemployed ended at just about 6% in 2014 — a giant improvement from 10% back in October of 2009. It’s sitting around 5.5% now, and experts expect it to end there in 2015 and perhaps grind a little lower to 5% by early 2016.

“Put simply, the labor market continues to tighten at a slow but moderate pace,” says Mr. Chaplin.

“Of course, the issue with labor market is that any statistic comes with a dozen caveats and conditional factors. For instance, despite improvements in unemployment, wage growth really hasn’t picked up as much as the experts would have hoped, as seen in the accompanying chart,” Chaplin adds.

But again, there are a wide variety of measurements available for each metric, and others indeed show a more promising wage pickup. Also, an unemployment rate under 6% spurs wage growth; as a result, Chaplin is confident that we will see that increase as well.

Plus, the labor market is just one example of economic strength that should continue to propel U.S. stocks higher. “The S&P 500 has doubled over the last five years and posted a bumpy-but-upward climb of 7% over the past 12 months, yet price-to-earnings valuations are around 17 right now — only slightly above the average of 15.7,” chimes Chaplin.

At an average valuation, investors can expect about a 10% return per year. At about one-third of a standard deviation above average, investors can expect strong and just slightly lower returns — likely 6% to 7% annualized.

“All in all, the equity markets have done very well over last six years or so thanks to strong earnings and economic growth. That foundation should continue to bode well for stocks in the second half of the year,” Chaplin concludes.