2015 Recap – 2016 Outlook

2015 Recap

2015 was a difficult year across the investment world as oil prices continued to fall, the U.S. dollar continued to strengthen, slowing growth in China hurt global economic growth, and increasing terrorist activity around the world created a level of uncertainty the financial markets dislike.  For the year, the U.S. stock market (S&P500) finished down 0.73%, while interest rates (U.S. 10yr Treasury) finished at 2.27%, up from 2.17% at the end of 2014. (source: Yahoo Finance) While the net change was very small, it was an extremely volatile year in equities with the most +/- 1% daily moves since 2011 and a record number of 24 times the S&P500 crossed between positive and negative during the year. (source: Bespoke Investments)

Globally, economic growth (as measured by Gross Domestic Product or GDP) has been slower when compared with historical recoveries from recessions.  The chart below, courtesy for BlackRock, shows that all major economies have lagged the historical trend.  This is somewhat due to the depth of the global recession caused by the 2008-2009 financial crisis, which was deeper than the average recession since 1960.  On the positive side, the slope of GDP growth in U.S. and Eurozone, while below trend,  is now tracking historical recoveries.



Themes for 2016

  1. Economy:
    • Global economic recovery remains slower, but may continue longer, than historical recovery cycles. I expect U.S. GDP growth for 2016 to be around 2.5%.  I do not see any signs of a recession in the U.S. in 2016.
    • Divergence in central bank monetary policy as the U.S. begins to tighten policy (raise rates) while Eurozone and Japan/China continue to loosen policy by lowering rates and/or increasing monetary stimulus. I expect the Federal Reserve to raise rates 1 to 3 times by 0.25% in 2016.
    • Oil prices stabilize in the $30-$50/barrel range.
    • China is the 2nd largest economy in the world behind the US.  They are struggling to transition from an industrial driven economy to a consumer driven economy like the US.  Gross Domestic Product (GDP) per capita in the US is $50,000 while in China it is only $15,000.  How successful they are will directly impact global economic conditions.


  1. Investments:
    • I expect volatility to remain elevated for 2016.  As I write this report, poor economic data out of China on 1/4/16 is creating a selloff in global equities on the 1st trading day of 2016.
    • I favor stocks over bonds – my targets for S&P500 gain 0 to 8%; US 10yr Treasury rates 2.5% to 3.0%
    • I favor dividend paying companies – (in 2015 the S&P500 declined 0.73% in price but gained 1.41% after dividends. source: Argus Research)
    • I favor cyclical sectors (technology, financials) over defensive sectors (consumer staples, utilities). I remain positive on healthcare.
    • I favor Japan & developed Europe over U.S.  & Emerging Markets  – EAFE 10 to 15%; US 0 to 8%; Emer mkts -5 to 5%
    • In fixed income I favor municipal bonds over high-yield and Treasuries


  1. Risks to Outlook:
    • Oil continues to decline and remains below $30/barrel
    •   U.S. interest rates spike
    • China leaders panic and retreat from reforms to a consumer-driven economy
    • Perhaps the biggest risk is geo-political risks.  As I write this report, Russia has declared the U.S. to be a threat to their national security, and Saudi Arabia cutoff relations with Iran.



In summary, I remain cautiously optimistic on global economic growth and general financial conditions for 2016. I continually monitor events and conditions and will let you know if any changes are warranted to our investment approach.


January Calendar of Events   (comments and additions for future months are always welcome)

  • January is National Blood Donation Month.  I’m donating on the 28th.  How about you?


January   5th                    My granddaughter Isys turn 10.  They grow up way too fast.

January 10th                    My better half, Eloise’s birthday.

January 15th                    the 6th anniversary of my independent practice – thank you to all my loyal clients.

January 18th                    Martin Luther King Day.  Let’s pray for more racial tolerance and understanding.


I hope you find this report useful.  Please pass it on to anyone who you feel would benefit from the information.

Sources: BlackRock, RiverFront Investment Group, Argus Research, Bespoke Investments

Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. 

Investing involves risk and you may incur a profit or a loss. Diversification does not ensure a profit or ensure against a loss. There is no assurance that any investment strategy will be successful.  Past performance is no assurance of future results.


Please consider the charges, risks, expenses and investment objectives carefully before investing. Please see a prospectus containing this and other information. Read it carefully before you invest or send money.


Information provided should not be construed as legal or tax advice.  You should discuss any tax or legal matter with the appropriate professional.



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