Thinking Twice About Profits, Currency and Opportunity Risk

• Markets may be focused on China’s devaluation, but I’m still paying attention to US profits.
• A commodity-driven earnings recession has plagued capital-heavy sectors like energy and materials.
• I think missing out on a renewed market advance could be the biggest risk for equity investors.

While the markets have been fixated recently on China’s currency moves, I have other things on my mind. I’ve been thinking that it has now been six years since the end of the last recession — making this expansion one year older than the average life span of business cycles after World War II. And for most of these six years, the United States has been on an impressive ride, both for company profits and the equity markets.

Pulled Apart or Pushed Ahead?

There may be things to worry about, but there’s also good news.
In my view, the global economy is not being pulled apart in 2015.
Low energy prices, interest rates and inflation could push the world ahead.

At the beginning of 2015, the worry machines of the world are working full time. We hear that China is a bubble, Japan cannot be fixed, Europe is a mess again and the United States is showing signs of slowing.

There may be some truth in all this, but there are other truths that we should also consider.