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A Global Perspective on Tectonic Shifts in Energy and the Current Bull Market

October 19, 2012

Tectonic shifts in energy — led by the development of horizontal fracturing (“fracking”) to tap into natural gas stores deep under the surface of the earth — are expected to lead the United States to energy independence by 2020.
-Doug Cote, chief market strategist, ING


The equity market has been surprising forecasters since it hit bottom in March 2009; three years later, little has changed. Reminiscent of the initial turning point in 2009, most

2012 forecasts have been bearish and thus far just plain wrong in terms of both direction and magnitude. Market seers have missed a relentless bull market by underestimating the resilience of business and consumer fundamentals (i.e., the privateeconomy) and overestimating the global risks.

In our ING Global Perspectives 2012 forecast we explored the long-term drivers of market prices that we call “tectonic shifts”; these explosive long-term trends have clearly impacted the “unpredictable” market rallies we have seen this year, adding fire to already hot fundamentals and a soothing chill to overheated global risks. These tectonic shifts can be found in four broad areas: global trade, technology, frontier markets and energy.

This report focuses on the impact energy has had on the private economy this year as well as our expectations for its long-term influence.

¦¦ Tectonic shifts in energy — led by the development of horizontal fracturing (“fracking”) to tap into natural gas stores deep under the surface of the earth — are expected to lead the United States to energy independence by 2020.

¦¦ Cheap and abundant natural gas is not a panacea for our energy needs, however; given the already-vital and still-growing role it plays in the global economy, energy must be diversified across all available sources to ensure it’s there when we need it.

¦¦ Over-regulation and misplaced government priorities threaten to stymie natural market forces and blunt the impact of the energy tectonic shift.

¦¦ The energy transformation will reduce the basic costs to run a society, freeing up capital for deployment in other parts of the economy.

¦¦ Many investors have failed to recognize fully the profound impact that the energy revolution — in concert with our other tectonic shifts — is having on market fundamentals and thus asset prices.

Read the Full Report

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