Baring Asset Management said the fall in oil prices will give the US consumer a $200 billion boost in disposable income. As a result, it has upgraded its view on consumer discretionary and consumer staples from underweight to neutral.
Marino Valensise, head of global multi-asset group at Baring Asset Management, said that while industry and manufacturing will benefit from cheaper oil, US consumers will be the biggest winners. However, in Europe, the impact of lower fuel costs will be diluted by high taxes and a weak euro, while a weak yen will have a similar effect in Japan. He added that the fall in oil prices has been a result of increased supply, not reduced demand, with lower than expected demand from China being a marginal factor, as it represents only 12% of global oil demand.
Valensise said that a negative aspect of the oil price fall will be reduced capital expenditure in the US, which may eventually lead to job losses. Overall, he said that 2015 will see significant volatility and the start of interest rate rises in the US.