Tags: Bianco | commodity | energy | industrial

Deutsche Bank's Bianco: Falling Commodity Prices Will Hurt Energy, Industrial Stocks

By    |   Wednesday, 10 December 2014 11:32 AM

While he expects the S&P 500 to rise in the mid-single digits next year, David Bianco, chief U.S. equity strategist for Deutsche Bank, isn't so optimistic about energy and industrial stocks for next year.

They will suffer from the decline in commodity prices, he told CNBC. The Bloomberg Commodity Index has dropped 11.4 percent so far this year, and oil prices hit another five-year low Wednesday.

Falling commodity prices will impact capital spending, putting pressure on industrial companies, Bianco said. China's slowdown and a strengthening dollar, buttressed by likely Federal Reserve interest rate hikes, also will hurt industrials, he noted.

"Industrial companies and a lot of U.S. investment spending is very sensitive to the energy patch. With what commodity prices have done, these companies are going to be forced to curtail capex [capital expenditures] to maintain cash flow," Bianco explained.

He favors banks, retailers, healthcare and technology stocks, as he expects U.S. economic growth to accelerate.

Meanwhile, Dan Chung, chief investment officer at Alger, thinks the Nasdaq Composite index will break through its March 2000 peak of 5,132.52 next year.

"I am very confident that the Nasdaq will reach new highs," sending "a very positive, powerful" message to investors, Chung told USA Today.

The Nasdaq is a whole different animal than it was 15 years ago, he noted. It's less technology-centric, with more healthcare, biotechnology and consumer companies.

In addition, "the valuations today are much lower, with the Nasdaq's price-to-earnings ratio based on next year's earnings estimates in the high teens," Chung remarked.

"The valuations back in 2000 were really 'NM,' or not meaningful. You had to do some magic, because a lot of the companies that drove the index did not have meaningful earnings at all."

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While he expects the S&P 500 to rise in the mid-single digits next year, David Bianco, chief U.S. equity strategist for Deutsche Bank, isn't so optimistic about energy and industrial stocks for next year.
Bianco, commodity, energy, industrial
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2014-32-10
Wednesday, 10 December 2014 11:32 AM
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