The 2016 Year in Review

In January 2016, we projected that the S&P 500 would gain 5% for the year, but we noted we would revisit that estimate in July.  In July, noting that an earnings recession among US corporations was coming to an end, we elevated our forecast to 10%.  For the full year, the S&P 500 rose 12.0%, so close enough.  Full details of US and world Indexes are here:

 Within the major categories, Energy stocks rallied 27.4%, as oil rose from a mid January low of $26/barrel to a year end high of $54.  On January 23rd, we wrote:

We would like to think that financial markets are "rational" but every once in a while, markets fixate on ONE particular indicator. In the last three weeks, price direction in stocks became entirely correlated with the price direction in oil.  Nothing else - earnings, interest rates, labor markets, industrial production, housing markets - seemed to matter.  Last August, investors fixated on the Chinese markets, which dragged down US stocks 11% in a month.  When the fixation dissipated, US stocks gained back the entire loss in 2 ½ months.  We expect the same will happen over the next few months, so starting Monday we are putting all our spare cash to work.

Indeed, we nailed the low for 2016.

Full commentary here: