Predictions for 2016
January 4, 2016
A nice long weekend gave me plenty of time for quiet reflective work, reading, and planning. 2015 is being described as a “dull” year for the US stock market. Last year we saw the S&P 500 Index fall by 0.73%. If we include the dividends paid it was up only 1.19% so we investors didn’t get much return for a long, hard fought 2015.
There certainly were big winners and losers, but investing should not be like walking into a casino going to the roulette table and putting your money on black 17 (your 2015 “black 17” by the way would have been Netflix which was up 146%). No, if we want to equate investing in the market to a trip to a casino we have to be the player that grinds it out. Our knowledge should be our investing edge. As we start a new year of investing where do we get our competitive edge as investors? Let’s look at what some of the biggest players in the market are predicting for 2016.
Morgan Stanley : 2016 will be the year of the “Great Rebalancing”. We are late in the recovery game but still have some way to go. 2016 could be like the seventh inning stretch at a ball game. They suggest a market that could be choppy. Central bankers around the world are split. The US will be raising rates and the rest of the world will still be looking at easy money policies. Lower risk assets should be favored.
Goldman Sachs : Global GDP growth will be in the 3.5% area, but the US will slow to 2.2% growth. They also see the US Fed continuing to slowly raise rates and the rest of the world keeping easy monetary policy. The dollar will be strong. Under the previous Fed Chairman investors had the “Bernanke Put” (invest without fear). Under the current Fed Chairman policy will be the “Yellen Call” (be careful), with limited upside in the market due to raising rates. 2016 will be a time of less liquidity in the market and oil could go back to $52 per barrel.
Barclays : Is looking for “mediocre returns” in the market. Their call is for the S&P 500 Index to climb to 2200 from its 2015 close of 2044.
Merrill Lynch : They also believe US Monetary Policy will be one of tightening while the rest of the world’s central bankers will be looking for stimulation. They are calling for the S&P to be up 7% for the year. They also predict that the yield on the 10-year treasury note will rise to 2.65% by the end of the year. Higher quality assets will do better than lower quality assets in a period of higher market volatility.
Citibank and JP Morgan : Both are calling for the S&P 500 Index to end 2016 at 2200.
Long term investors understand that surprises occur in the markets. Investing money long-term is about being aware of what the experts are predicting but also remembering that things change. Remember your portfolio should be built around your own understanding and tolerance for risk. 2016 marks my 39th year investing and I’m certain it will be an interesting one.
Carl Gambrell
