2015…..OIL, THE FED and CHINA
Through all of these events the US market exhibited resilience. The US corporations would have performed better without these headwinds.
So today we sit with a slightly positive principal return on the S&P500, the inclusion of dividends brings that return up.
The Nasdaq was the clear US winner with a 8% return through last night.
The Dow is still slightly under flat, but with the dividends looks a bit better.
We have 2 more trading sessions (of very light volumes) to round out 2015. The market is flat so far with Oil heading downward.
The THREE major THEMES that dominated the markets this year were…..
THE FED……CHINA and of course OIL
1. The Fed speak throughout the 1st of half of 2015 led the markets up and down then sideways.
2. China lowered expectations and unknown margin amounts really kicked in as we entered the 3rd quarter and the US earnings season.
3. The culmination of all the aforementioned uncertainty coupled with the falling oil prices and the adjusted earnings guidance perpetuated through August.
4. September, October and November showed radical swings as the Fed prepared for their rate hike and “NOPEC” became the new word of the 4th quarter.
5. December markets have been dominated by Oil.
This could translate to additional upside as we turn the corner into 2016.
Other things that did not work in 2015.
• Commodities remained out of favor and falling, contributing to a global market slide in both developed and emerging markets.
• Hedge Funds continued to fail investors, counting on a return to higher Oil prices and other global interests including currencies.
• Most hedging strategies did not work out because the US remained strong throughout 2015.
Oil and the Fed Hike
We have seen Oil (West Texas Crude) slump from over $60 a barrel in May of 2015 to below $37 in December, an additional 38% slide in only 7 months. We are approaching the lows of 2004 and this may be a real possibility. This will contribute to continued High Yield fallout as we enter 2016 and look for bankruptcies in the Exploration and Production segment. But buying, for the long term in quality names will pay off in the years to come.
The Fed hike has yet to trickle into mainstream economy and consumers. So far no major bank has announced an across the board increase for deposit accounts. Some have done this for selected High Net Worth clients. The prime rate and credit card rates are being adjusted and other lending rates as well. Mortgages have not been too affected by the change due the longer termed nature and how the yield curve has responded. Mortgage rates remain historically low.
Please call us to answer any question you may have.