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MARKET COMMENTARY  |  January 2015

Jim Rothenberg on the Year Ahead

A portfolio manager discusses the U.S.’s return to world economic dominance, the positive implications of a rise in interest rates, how he sees today’s market volatility as a plus, the importance of maintaining equity exposure outside the U.S. and the potential benefits of opening a 529 college savings plan.

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U.S. Economic Outlook Lifted by Favorable Tailwinds

Economist Darrell Spence discusses his expectations for accelerating growth in the U.S.

Despite recent signs of a slowdown in activity, the U.S. economy remains in expansion mode and growth is likely to accelerate in the months ahead, says Capital Group economist Darrell Spence. Severe weather has clearly had an impact in recent months. However, taking a step back and looking at the big picture, the U.S. economic recovery remains on track, thanks to pent-up housing demand, accommodative monetary policy, improving fiscal conditions at state and local governments, a significant federal budget compromise, and the end of a long-running recession in Europe that had dented U.S. exports. 

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Oil Price Declines Could Have Far-Reaching Effects

Analysts and Portfolio Managers Weigh Valuations Amid Ongoing Volatility

In 2014, oil prices posted their largest annual decline since the global financial crisis, losing more than 45% as weaker demand and strong global crude output created a supply glut. The collapse saw prices at a five–year low, battering energy shares — which finished 2014 nearly 13% lower — and weighing heavily on financial markets in oil–exporting countries. In our view:

  • Oil prices could continue to remain low — and may even continue to decline — before supply–demand imbalances are corrected.
  • Some oil companies have begun to show signs of better capital discipline, but many have room to improve.
  • Despite lower prices in the near term, demand fundamentals over the longer term should remain supportive of higher oil prices.
  • Market declines may provide some attractive entry points for investors.

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The Future Looks Bright

Flying cars? No, sorry. Hoverboards? Probably not, although there is progress on that front. The future, it seems, isn’t going to be filled with all the fantastic things people have dreamed up. But it is going to be remarkable.

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Market Update: Russia

  • The Russian ruble has experienced a sharp decline in recent weeks concurrent with the decline in the oil price, forcing the central bank to sharply raise interest rates.
  • Russian stocks, bonds and the currency remain under pressure against the backdrop of deteriorating economic conditions, sharply lower oil and the impact of international sanctions.
  • Broadly speaking, we have remained cautious on Russia, with relatively few investments in that market across our funds. 

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American Funds College Target Date Series

Our college target date funds were designed to address the challenges of saving for the rising cost of higher education.


Cash Machines Can Be a Cash Machine for ATM Makers

Sources: (for ATM penetration) ATM Industry Association (ATMIA), ATM Marketplace, Bank of Spain, NCR Corporation, Retail Banking Research (RBR), and Susquehanna Financial Group, LLP/SFG Research and Susquehanna International Group, LLP (SIG); (for ATM cash withdrawals) Bank for International Settlements (BIS),Statistics on Payment, Clearing and Settlement Systems in the CPSS Countries, January and December 2013reports. Cash withdrawals at ATMs represent transactions at ATMs located in the country, with cards issued in the country.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.  

The statements expressed herein are opinions of the individuals identified, are as of the date published, and do not reflect the opinions of Capital Group or its affiliates. The information provided is intended to highlight issues and not to be comprehensive or to provide advice. Any reproduction, modification, distribution, transmission or republication of the content, in part or in full, is prohibited. 

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses , which can be obtained from a financial professional and should be read carefully before investing.