Terry Sawchuk Founder & Chairman
Happy New Year!! We hope that 2016 is a little more productive in the markets than it was in 2015.Each new year brings about a rehashing of last years results, resolutions and predictions for the coming year. This seems like the perfect time to cover these topics (no need to bore you with our resolutions). The financial market headlines for 2015 consisted of:
- Lower Oil Prices (most all energy prices)
- Lower Growth in China
- Stronger US$
- Continued weakness in Europe
- Slow growth in the US economy (it’s still growth)
- Will the Fed raise rates? (yes they did)
- Volatility on the rise
- Too many terrorist events
In January of 2015 Terry and I suggested that the year would be tough. There was going to be headwinds pushing the markets down along with some growth opportunities. The S&P 500 and the Dow Jones were both in the red, albeit just a point or 2. The end result, the growth opportunities were canceled out by the global issues. The markets moved sideways for the better part of the year. Historically, the third year of presidential term is often a good year in the markets. Didn’t happen last year
For those of you who remember, I have a magic 8-ball in my office. A few years back a client wanted to know if he was going to win a golf bet that he was going to make. He shook the 8-ball and was told that he would win. He called me the next day to let me know that he did indeed win. I went back to the 8-ball only to find out that the dice inside no longer floated to top to reveal an answer. Shame on me for wasting such a good luck charm on a golf bet. I now have a black paperweight in my office. With that said, it’s time to toss out our 2016 predictions:
- Oil prices will remain in the news
- China will be a huge focus
- Volatility will not go away
- Continued unrest in the Middle East
- More of the same from 2015
The fourth year of a presidential term is usually a flat year for the markets. The uncertainty of election outcome “confuses” the markets and not much often happens as a result. The first trading day of 2016 showed the confusion in full force. The headline news item was low growth in China. The funny thing here is that this is the 10th consecutive month that China reported lower growth. This should not have surprised anyone. Yet, the Dow was down more than 400 points at points during the trading day. The market ended up only down 256 points. I say “only” as the loss could have been much worse. These large swings during the day are the definition of volatility.
Geopolitical tensions seem to be rising as well. This factor is not easy to explain in the markets. However, the actions in the Middle East bring back memories of the Cold War; Russia and Iran seem to be teamed up on one side with the US and Saudi Arabia on the other. This global tension is going to fuel volatility as well as speculation about oil prices. Interruptions in oil production could spike the price of oil. Global tensions could result in opportunities in the aerospace and defense sector while putting downward pressure on the overall markets.
Terry and I are watching the store closely and staying on top of these evolving situations. As usual we will keep you posted on necessary adjustments to the portfolios as they arise. As always, we appreciate your trust and confidence.
Happy New Year.
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