04 Jan WELCOME 2016!! AND GOOD RIDDENCE TO 2015!!!!
Welcome to 2016. For most, 2015 is a year all would like to forget. The only strategy that worked was short oil/commodities and go long the dollar and buying the 10 mega capitalized growth issues.
Everything else was pounded into oblivion, a decimation the result of high frequency trading and indexing connected to exchange traded funds. Generally speaking, the big got bigger and the small got smaller. According to CNB, the typical stock was down over 20% in 2015.
2015 also marked the year the number of ETFs surpassed the number of listed securities, the year the Fed increased interest rates for the first time since 2006, and the complete acceptance that tomorrow will be the same as today where momentum ruled. There was little economic and company analysis, just chasing cross collateralized trends.
In my view the last time the environment was this myopic and returns were so bifurcated was 1999, the era when all thought we entered into the New Paradigm and the business cycle was dead.
Will 2016 be a year of change where growth exceeds on the upside, interest rates rise, commodities and the individual equity greatly outperforms, and momentum dies an ugly death? Will 2016 be a repeat of 2003, the rebound that occurred after the New Paradigm died an ugly death?
I am an ardent believe funds ultimately gravitate to issues that offer the greatest potential return and the least amount of risk. If growth exceeds on the upside, and if interest rates are increased at a pace similar to the early 2000s, and if economic/corporate analysis returns…aka 2003…2016 may be the opposite of 2015.
Last night the foreign markets were down. London was down 2.39%, Paris down 2.60% and Frankfurt down 4.11%. China was down 6.86%, Japan down 3.06% and Hang Sang down 2.68%.
The Dow should open considerably lower as China may again devalue because of disappointing data.
And then there is the Middle East. Students of foreign policy believe an attack on an embassy is an attack on the sovereign country. The severing of diplomatic ties is the final step to a War declaration. Saudi Arabia severed ties with Iran. So did Bahrain. Will the Middle East replace China just as China replaced Greece six months ago?
The 10-year is up 13/32 to yield 2.23%.