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SUNDAY, DECEMBER 28, 2014 Call: (803) 774-1226 | E-mail: pressrelease@theitem.com
Investors expect turbulent 2015 BY KEN SWEET The Associated Press NEW YORK — Can the U.S. hold everyone else above water? That is the question investors are asking as Wall Street heads into 2015. A strong U.S. economy helped propel the stock market higher in 2014, continuing a bull market that is on pace to celebrate its sixth birthday in March. On more than one occasion, investors dumped stocks following geopolitical flare-ups and concerns about the global economy, only to jump back in when an economic report or results from a big company suggested the U.S. economy was still resilient. This bull market may be slowing down, but it still has had a remarkable run. The Standard & Poor’s 500 index has more than tripled from its March 2009 low. Wall Street strategists, who typically are bullish on the U.S. stock market, expect the advance to continue into 2015. Here are the major themes investors will need to watch: SOLID, NOT SPECTACULAR, AGAIN 2014 has been an above average year for stocks, but Wall Street forecasters expect a more modest year for the market in 2015. The S&P 500 index is on track to return 14 percent in 2014 including dividends, a healthy gain but well below the 2013 return of 32 percent. Because the U.S. economy should continue to improve, stocks are likely to march higher in 2015, strategists say. On average, strategists forecast the S&P 500 will be up roughly 6 to 8 percent, with most of the gains coming from large multinational companies that would benefit greatly from an improving U.S. economy. Although there are risks that U.S.-based companies international sales could slow because of weakness in Europe and Asia, strategists believe U.S. growth will make up for that drag. While U.S.-based companies do roughly half their sales outside the country, profits are still largely driven by the American economy. The U.S. economy is expected to grow 3.1 percent in 2015, accelerating from the 2.2 percent growth it is expected to have this year. This is a mature bull market, strategists say, so stock prices are relatively high and the possibility for volatility even higher. Investors are paying roughly $17.50 for every dollar of earnings companies in the S&P 500 generate, the most they’ve paid for stocks since 2010. On average, investors pay something around $15 dollars for every $1 of earnings These high valuations could make investors more nervous about holding stocks if prices continue to climb. The stock market fell nearly 10 percent in October, its first major selloff since 2011. SLOW RATE HIKES For several years, the Federal Reserve had been buying bonds to both keep interest rates low and boost stock prices. The program, known as quantitative easing, was designed to make bonds seem more expensive than stocks by suppressing the yield on bonds. It was also designed to make it less expensive for consumers and businesses to borrow. That program ended in October, but it doesn’t mean the nation’s central bank hasn’t stopped helping out investors. The Fed has kept its key interest rate near zero since December 2008. Strategists believe the time has come for the Fed to start raising interest rates because the U.S. economy has improved enough to with-
stand higher borrowing costs. This phenomenon is going to have a huge impact on where the stock market goes in 2015. MUCH ADO ABOUT OIL The collapse of oil prices this year has become a huge topic of worry as well as a comfort for investors. American consumers love that falling oil prices have driven the price of gasoline below $2.50 a gallon. Wall Street’s relationship with oil is far more complex, however. Oil revenues are critical for several large economies, including Russia’s. Banks loaned money and energy companies issued high-yield bonds to investors based on projected oil revenues. Energy companies are reliant on high crude prices to make money and to keep their stock prices high. Shares of energy companies in the S&P 500 are down 10 percent this year. Many junk bonds are trading at distressed levels. There’s worry that oil’s drop could shake up the global financial system. Russia’s currency, the ruble, has slumped in recent months because investors are concerned that the government could default or that the country could slip into a recession. In 1998, Russia defaulted on its debt, in part because of plunging oil prices. The big question for next year is whether the world is simply producing too much oil, or whether the global economy is not strong enough to consume it fast enough. Also, if prices keep falling, will oil producers start cutting back production, which in turn could provide some support for oil prices.
PHOTOS BY RICK CARPENTER / THE SUMTER ITEM
The logistics side of SunPak even supplies conveyer belt equipment to help customers move products.
SunPak Logistics uses its own packaging to tell its story to potential clients.
SUNPAK LOGISTICS SERVICES
OPPORTUNITY OVERSEAS? Europe’s economy was in recovery mode the first half of 2014 before being derailed by the Russia-Ukraine crisis. The economic sanctions the European Union put on Russia for its invasion of Crimea impacted Germany’s economy, Europe’s largest, far more than originally anticipated. Since then, Europe has teetered on the brink of recession. The Euro Stoxx 50 index, the European equivalent of the Dow Jones industrial average, is up only 1 percent in 2014 versus the 12 percent increase in the S&P 500. The European Central Bank has stepped in to help stimulate the region’s economy and is expected to ramp up its efforts early next year. If the moves work, Europe will come off investors’ worry lists. Until then, watch out. If you’re willing to take a more risky view, some strategists say buying into Europe before it recovers could provide an excellent return. BONDS WILL HAVE A TOUGH YEAR, OR WON’T The biggest prediction of 2014 to fall flat on its face was that bonds would have a bad year in 2014. They didn’t; in fact, they went in the opposite direction. Instead of the 10-year U.S. Treasury note going from 2.97 percent at the beginning of the year up to 3.5 percent, as many predicted, the benchmark note was yielding 2.18 percent as of Dec. 22. Many strategists readily admit they completely missed on their bond predictions. Nevertheless, many investors are doubling down on their bond yield forecasts for 2015, with some looking for the 10-year yield to reach 2.5 percent to 2.75 percent next year. They reason that the U.S. economy is improving and the Federal Reserve is expected to raise interest rates.
SunPak has equipment that provides specialty packaging for customers’ needs.
DeSollar transitions from finance to entrepreneurship BY RICK CARPENTER rick@theitem.com Although Cathy DeSollar can track her interest in logistics back to her childhood, it wasn’t until she was taking an MBA program at USC that she realized she was on the wrong side of entrepreneurship. At the time, she was providing financial support for startups and realized that all she needed to do was find an existing need and solve that need through a business venture. Her husband, Ben DeSollar, was already in the packaging business as owner of Sumter Packaging Co., which manufactures corrugated shipping containers and specialty packaging. But they discussed needs of area businesses and discovered a niche that met Cathy’s criteria. She launched SunPak Logistics in 2011 to assist larger manufacturers who need help assembling, packaging and shipping products of all sizes. Maybe logistics was, well, a “logical” choice. After all, she often tagged along with her father, who managed the third largest port in the world in Kaohsiung, Taiwan. After high school, she went to a teacher’s college in Taiwan, but later received a diploma in credit analysis from New York University. DeSollar had been working as a commercial portfolio manager for Regions Bank; but it was while attending USC and still helping people finance their businesses, one day she just said “I want to be on the other side.” Ben DeSollar knew that Midwest Stamping had gone out of business and the building near Sumter Packaging in Live Oak Industrial Park was vacant. Sumter Packaging bought the building and converted it to what now serves as SunPak’s office space, a fulfillment center, an assembling and storage area and a packaging facility that shrink wraps individual products. SunPak leases 82,000 square feet of the building. The company even has the capability of working for the aerospace industry. By
• Custom packaging design • Warehousing and distribution • Kitting • Assembly and sub-assembly • Labeling • Pick and pack • Cross-docking and transloading • Returns management • Repackaging • Retail and wholesale • E-commerce order fulfillment • Cloud-based real time information • Serving wholesale/retail, medical, paper and manufacturing customers
FOR MORE INFORMATION WHAT: SunPak Logistics ADDRESS: 2525 Corporate Way, Sumter PHONE: (803) 481-8881 Email: Cathy DeSollar at cdesollar@sunpaklogistics. com.
passing the requirements for an AS 9100 and ISO 9001 — both quality management systems certifications that major manufacturers such as Boeing and Eaton often use for quality control and logistic processes – SunPak can provide services for small mom-and-pop companies as well as major industrial manufacturers. Just this month, Eaton selected SunPak Logistics to provide serDeSOLLAR vices for its Sumter Mission Critical Solutions Center. Although it’s not clear exactly what happens at the center, Eaton’s Sumter facility manufactures electrical power assemblies for applications where reliability and efficiency are critical to maintain business continuity and operations such as data centers, according to a news release sent by SunPak last week. SunPak employees help assemble circuit boards for Eaton that can weigh as much as 1,000 pounds. Then they package and ship them. Working with SunPak allows companies to check on their level of inventory online so they can adjust their production schedules when they need to. Cathy DeSollar said the company employs about 10 full-time supervisors but relies on 20 to 40 temporary employees when it secures jobs that need labor to do everything from assembling the circuit boards to building pallets from raw materials. They even have the logistic capabilities of designing conveyor belts to move products, depending on their needs. While they are relatively small, after landing the Eaton contract, DeSollar said she’s ready to help solve complex problems that assembling and shipping might create for larger companies with a local presence from Continental Tire the Americas in Sumter to Boeing in Charleston. It just requires adjusting her company’s capabilities to the needs of those companies — which is why she stepped out of finance and into the entrepreneur side of things. You could say she’s crossed that line.