December 7, 2015
The
Markets
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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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