Anyone looking at U.S. stock market performance
last week might assume it was a pretty quiet week. They would be wrong. It was
a very bouncy week. U.S. stock markets moved lower on Monday, rebounded on
Tuesday, and then appeared to suffer a one-two punch mid-week that knocked indices
lower.
On Wednesday, the benchmark U.S. oil price
sank below $40 a barrel as supply continued to exceed demand, according to The Wall Street Journal (WSJ). Analysts
had expected stockpiles of crude oil, gasoline, and other fuels to decline.
Instead, stores increased to more than 1.3 billion barrels. The glut of fuel
drove energy stock values down and energy stocks led the broader market lower,
according to WSJ.
Performance did not improve on Thursday. In
part, this was because the European Central Bank (ECB) underwhelmed markets
when it delivered economic measures that were less stimulative than many had
expected. The Financial Times
reported the ECB reduced rates and pledged to extend quantitative easing for
six additional months, but it did not increase the amount of its bond
purchases, which disappointed investors. Stock markets in Europe and the United
States lost value on the news.
On Friday, a strong jobs report restored
investors’ enthusiasm and markets regained losses suffered earlier in the week,
according to ABC News. The Department
of Labor announced 211,000 jobs were added in November, which was more than
analysts had expected. Strong employment numbers made the possibility of a
Federal Reserve rate hike seem more certain and investors welcomed certainty.
The ECB jumped into the good-news pool on Friday, too, announcing it would
expand stimulus measures, if necessary.
The Standard & Poor’s 500, Dow Jones
Industrial, and NASDAQ indices were all up for the week.
it’s that time of the year. No, not the holidays. It’s the time when investors
begin to consider pundits’ forecasts for the coming year. Here are a few of
those forecasts:
“Flat is the
new up,” was the catch phrase for Goldman Sachs’ analysts last August, and
their outlook doesn’t appear to have changed for the United States. In Outlook 2016, they predicted U.S. stocks
will have limited upside next year and expressed concern that positive economic
news may bring additional Fed tightening. Goldman expects global growth to
stabilize during 2016 as emerging markets rebound, and Europe and Japan may experience
improvement.
Jeremy
Grantham of GMO, who is known for gloomy outlooks, is not concerned about the
Federal Reserve raising rates, according to Financial
Times (FT). FT quoted Grantham as
saying, “We might have a wobbly few weeks…but I’m sure the Fed will stroke us
like you wouldn’t believe and the markets will settle down, and most probably
go to a new high.” Grantham expects the high to be followed by a low. He has
been predicting global markets will experience a major decline in 2016 for a
couple years, and he anticipates the downturn could be accompanied by global
bankruptcies.
PWC’s Trendsetter Barometer offered a business outlook after surveying
corporate executives. After the third quarter of 2015, it found, “U.S. economic
fundamentals remain strong, but markets and executives like predictability, and
that’s not what we’ve been getting lately… Trendsetter growth forecasts are
down, so are plans for [capital expenditure] spending, hiring, and more. It
doesn’t help that we’ve entered a contentious 2016 election season...”
The Economist had this advice for investors who are
reviewing economic forecasts, “Economic forecasting is an art, not a science.
Of course, we have to make some guess. The average citizen would be well
advised, however, to treat all forecasts with a bucket (not just a pinch) of
salt.”
Weekly
Focus – Think About It
“Weather forecast for tonight: dark.”
--George Carlin,
American comedian
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