See table below for performance of commonly used benchmarks. Recall benchmarks are hypothetical and have no investment fees considered.
However, markets didn’t stay there; investors quickly regained their optimism and bought the dip, sending the S&P 500 up nearly 9.5% by the end of the year.7 The lesson? Corrections are normal, healthy parts of the market cycle. While the sky can seem like it’s falling at times, taking a deep breath and looking at underlying fundamentals is key to avoiding emotional reactions.
The labor market also continued to make progress last year. Overall, the economy is projected to have gained 2.5 million new jobs in 2015 and trimmed the unemployment rate to 5.0%. After 2014’s 3.1 million new jobs, we can say that 2015 ends the best two-year period for the labor market since the dot-com boom days of 1998-1999. Though wage growth still isn’t spectacular, hourly earnings increased 2.3% over the year. 9
Comparing the jobs growth to the previous year’s total might suggest that the labor market growth slowed down in 2015. However, the rate of voluntary “quits” increased in 2015, indicating that people feel comfortable enough in their prospects to leave their jobs for greener pastures.10 All told, the labor market did a lot to boost the economy last year.
Headwinds and Tailwinds in 2016
Overall, Wall Street is also cautious about stocks in 2016. A poll of top Wall Street analysts forecasted an average S&P 500 gain of 6.28% growth in 2016.12 As always, it’s best to treat these predictions with caution as projections this early in the year are always nebulous. What we can do right now is take a look at fundamentals and think about how these factors might play out in market performance.
In the coming weeks, investors will be looking hard at fourth-quarter numbers to see how U.S. companies performed in the final months of the year. In the week ahead we’ll see the December jobs report and learn more about the Fed’s decision-making process around rates. We’ll also see whether higher interest rates affected demand for vehicle sales and other big-ticket items at the end of the year.13
As always, if you have any questions about markets or your personal situation, please give us a call. We are honored by the trust you place in us and look forward to serving you in 2016.
Thursday: Jobless Claims
Jobless claims jump sharply. The number of Americans filing new claims for unemployment benefits jumped by 20,000, likely because of seasonal holiday factors.15
Midwestern manufacturing slips. A measure of the manufacturing industry in the Midwest indicates that December activity fell to the lowest level since mid-2009. While seasonal factors could affect the data, it could indicate sustained weakness in the factory-heavy region.16
Puerto Rico makes bond payments. The U.S. territory, which has been struggling to make debt payments, will make full bond payments on its General Obligation (GO) bonds in January. 17
Best Regards, Kevin Kroskey
6 Source: Yahoo Finance. S&P 500 price performance between 8/10/15 and 8/25/15.
7 Source: Yahoo Finance. S&P 500 price performance between 8/25/15 and 12/31/15.
Average S&P 500 return calculation: 2,063.36 12/31/15 close to 2,193 average 2016 price target