Oil

Oil: Macquarie opines oil could stay at low US$60s/bbl for years, or as long as it takes for OPEC to drive out US shale or to reduce Putin’s power. Hence, positioning for cheap oil will be the key to outperformance in the next 3 years as oil prices are likely a key driver of growth, inflation and interest rates. Assuming oil stays at such prices, Macquarie recommends: Buy Consumer Exposures, esp US/Europe: Cheap oil is a tax cut that benefits low-income consumers most. Highest leverage include food, soda, retail, media, tobacco and beer. Safe to hold yield names for another year: Low oil prices will hold down inflation, keeping Fed on hold for longer, while supporting the case for QE in both Europe and Japan. These will support bond prices and delay a yield sell-off. Housing to accelerate in the USA and China in 2015: The positive effect on US consumers form low oil and low mortgage rates should drive US new home construction. Policy easing should drive a recovery in China property. Latest data suggests a trough in house price growth, which is bullish. Alternative energy will be under pressure. High oil prices the case for alternative energy compelling. With lower oil, gas and coal prices, the economic cost rational for alternatives is dissipating. Macquarie thinks Tesla shareholders should watch out. Macquarie top O/W on US, on tailwinds like cheap nergy, long housing recovery and globally dominant software sector. Valuations can continue to rise until Fed starts to hike. Macquarie like Wells Fargo, FedEx, Union Pacific, Dow Chemical and Liberty Global. It also has Buys on Google and Apple but would short Market Vectors Global Alternative Energy ETF