2016 OutlookSubmitted by Group W - Investment Management on January 1st, 2016
Despite a decent performance by the U.S. economy, the stock market turned in lackluster results in 2015. The unemployment rate dropped to levels not seen since before the financial panic of 2008/2009. Real GDP growth for 2015 chugged along at a steady, though unspectacular rate of about 2¼ percent. Real estate values continued to recover from the big sell-off.
However, the U.S. stock market performed poorly in 2015 and ended the year essentially flat as measured by the S&P 500 Index. Investors turned cautious in 2015 due to the prospect of rising interest rates and the associated strengthening of the U.S. dollar in relation to the currencies of our trading partners. A strong U.S. dollar affects the earnings of companies by reducing the dollar value of sales made in foreign currencies. Most of the companies in Group W’s stable of stocks are large multi-national corporations that sell much of their goods and services in foreign countries. This is the primary reason for the sub-par returns in your investment portfolio in 2015.
Looking forward to 2016, an important driver of market results will be the foreign exchange rates for the dollar. If the dollar is stable or loses value, corporate earnings will rebound, and U.S. stocks should do very well. On the other hand, if the greenback continues to increase in value, look for continuing tepid returns in 2016.