After the Storm, Smooth Sailing (But What About Hurricane Trump?)


We are entertained and informed by looking back at past commentaries to see how our forecasts turned out. What can we learn from predictions that were right (and those that were wrong?)

The recent stock market correction (and the rally that followed)

From early November 2015 through February 11th, 2016, US stocks plunged 13.3%. Oil approached $24/barrel, threatening prices in the teens. In our February 14th commentary "On a Cruise Ship in a Storm, Anything but Smooth Sailing, " we wrote:

 Metaphorically speaking, our clients feel like those cruise ship passengers right now. The weather wasn't great in 2015, and seems to be getting worse in 2016. The S&P 500 declined 12.6% since last May, 8.5% since start of year, touching levels seen briefly in January 2015, August 2015, and is now back at the level of January 2014. And yet, compared to 2008-9, these are only 10 foot waves (a decline of 12.6% versus a decline of 55%.) Our "all-weather" portfolios survived the storm of 2008-9 (50 foot waves,) and will survive this storm as well.

Up here on the bridge, we forecast clearing skies.

Obviously other investors are reading our comments, because starting the next trading day US stocks advanced 14.9% in seven weeks, failing by 1.4% to make a new record high on April 20th, with a high water mark for the year of 4.0%. Thereafter, stocks returned to the same range-bound trading that persisted through much of 2015. Corporate revenues are flat, earnings are flat to negative and interest rates are drifting higher. As of May 13th, US stocks are up 0.96% YTD. Our year end target from January of plus 5% in the S&P 500 remains unchanged.