View from the Chair: Windermere's Market Outlook (January 2016)

By Ken Evason, CFA and Pam Evason, CFA

Don’t let the slightly negative return for the S&P 500 in 2015 fool you – this was anything but a benign year.  It was a year in which oil tumbled, the dollar soared, China’s markets did some of each, the Fed raised rates for the first time in nine years, a flash crash occurred, the race for president kicked off, and the markets fluctuated more than we’ve seen in years. 

All of these events resulted in flat to negative returns for almost all asset classes. See below table for highlights of asset class returns for 2015 (click image to expand)

Commend yourself – you endured the roller coaster of 2015 and now we turn our sights to 2016.  What do we anticipate for the new year?

  • Energy prices at now 12-year lows will be a catalyst for growth going forward, particularly in consumer names
  • Global economy will strengthen from here, aided by demographic trends and ongoing accommodative monetary policy, which will translate to rising wealth levels across the globe
  •  Patient investors will be rewarded with attractive returns from portfolios tilted towards global equities and away from long-dated fixed income
  •  Select developing economies will benefit from lower energy prices and rising middle class populations
  • Stabilization in the US dollar and rebound in commodity prices will be positives for global markets

With all that said, the first several trading days of 2016 brought even more volatility, with equity indexes down over 6% year to date.  Markets are fundamentally based on supply and demand and simply put – these price declines means we are in a period where sellers are outpacing buyers.  What’s driving that?  A variety of factors including: profit taking upon the start of a new tax year, concerns over China’s equity markets and slowing growth, and ongoing declines in energy and increases in the USD.  We anticipate the selling to slow and markets to stabilize shortly – and also anticipate stronger than expected earnings in key sectors (technology and consumer discretionary) to provide additional good news in the new year.  Stay the course.  Stay optimistic.  Stay invested.

We thank you for your ongoing support and rest assured – we constantly strive to provide  attractive risk adjusted returns for our clients.