Happy New Years Traders! We hope you had an extremely profitable 2015 in the financial markets! 2015 didn’t disappoint in terms of volatility as we saw commodities like oil prices drop dramatically from the high 60’s down to the current 30’s levels. As well, we saw precious metals like Gold, Silver and a whole slew of Base Metals come crashing down to levels that we haven’t seen since the financial crisis. For the broad US Markets, we ended the year down in the RED but barely. China was the big catalyst for global markets this year. The biggest surprise was the crash in the Global Financial Markets in August when it felt like Financial Crisis 2.0. Fortunately, investors and traders shrugged that event off and regained all its losses. So how is 2016 going to turn out?
Well… let us take out our crystal ball and find out… Just kidding… we don’t have one and have no idea how 2016 is going to play out. However, we wouldn’t be surprised to see that August crash happen again in 2016. Those types of crashes hurt investor confidence and are not easily forgotten by investors. 2015 was in general a difficult year for the Global Financial Markets and we would expect 2016 to be another challenging year.
S&P 500 CHART for 2015
Technology start ups were hot in 2015 as you saw companies like Uber valued at over $60B but we are already starting to see capital dry up to fund new technology companies. The technology heavy Nasdaq 100 index was one of the best index performers in 2015 which was up 7%.
Nasdaq 100 CHART for 2015
Our 4 favorite technology companies: Facebook, Amazon.com, Netflix and Google were up 33%, 116%, 132%, 43% respectively. It would not surprise us to see the Nasdaq underperform this year compared to 2015.
Netflix (NFLX) chart UP 132% in 2015
2015 was the year of the biotechnology industry as many companies in the sector soared. The popular ETF, IBB Biotech Index went up as much as 31% before closing up 10% for the year. We wouldn’t be surprised to see further appreciation in the sector, given the aging baby boomer population.
Biotechnology ETF (IBB) chart UP 10% in 2015
In late 2015, we saw the first US Rate Hike in 9 years and depending on the improvement in the US economy, we could see further rate hikes in 2016. This wouldn’t pose well for the recovering US Real Estate sector, particularly in the hot markets such as New York and San Francisco. The US Homebuilder ETF index (XHB) ended the year flat and it might be a tough year given the strong recovery since 2009.
Homebuilders ETF (XHB) chart 0% in 2015
The sectors that we are watching carefully for some type of recovery would be the Oil and Precious/Base Metals. These sectors have gotten decimated in the past 2 years (2014-2015) and eventhough we don’t think there’s going to be a strong recovery, we could see the bottom in prices in 2016. Current oil prices are in the $30’s not seen since 2009. Gold prices are close to $1,000 not seen since 2008-2009. Base metals such as Iron Ore, Zinc, Nickel, Copper etc… are the same. If there’s a time to start cherry picking companies and commodities in this sector, the time is now.
US Crude Oil (2015)
Base Metals ETF (DBB) (2015)
The New Year always brings great hope and pursuit of success for all traders. It’s time to put on your trader caps and start making some money. Best of luck in 2016!
Disclosure: We don’t own any company stocks as indicated on this post.