Market Commentary January 2016

Please find this month’s Market Commentary newsletter which contains our view on the stock market based upon fundamental and technical analysis along with some recommended investments for the current market.

Unfortunately, the traditional Santa Claus rally along with various other favourable seasonal tendencies disappointed equity investors in 2015. The calendar reveals the market’s tendencies but at the end of the day that’s all they are: tendencies, not guarantees. One thing 2016 may have going for it is the fact that markets tend not to repeat their minor mistakes. Granted, stocks can be down sharply for several consecutive years, as occurred in 2000-02. But when the market has an isolated “dud” year – say, up or down less than 2% – it tends to follow with a strong performance. The S&P 500 has recorded four such “dud” years since 1980 (1984, 1987, 1994 and 2011). The following 12 months averaged 21.6% capital appreciation. We also note that government spending typically rises in US presidential election years, as the incumbent party “primes the pump” to juice the economy and make its citizens feel prosperous. In the last presidential election year of 2012, the S&P 500 appreciated 13.4%. Ultimately though, stock market success or failure in 2016 will depend on fundamentals. But don’t completely overlook the calendar.