This past Friday, the US Employment Report for November showed an increase of over 200,000 of new jobs added and a steady unemployment rate of 5%. This strong jobs report met analysts expectations and gave an optimistic picture of the recovering US economy. More importantly, it gave the BIG THUMBS UP signal to the US Federal Reserve to raise interest rates from near ZERO LEVELS when the members of the Federal Reserve meet on Dec 16. The US Federal Reserve Chairwoman, Janet Yellen had been cautious in the possibility of raising rates too early given the weak US economy but with the improvement in recent months of the US economy and the amnesia of the recent August Stock Market Crash, it looks like a DONE DEAL. However, they expect the path of rate increases to be gradual.
So what does this mean for you as a trader or investor? When interest rates increase, this will certainly affect sectors that are interest rate sensitive and one sector is the Real Estate sector. Given the incredible recovery in the US Housing Market after the Financial Crisis, it wouldn’t be a surprise for the Red Hot Real Estate Market to cool down. Another sector that has been one of the best performing in recent years has been technology. We’ve seen stocks like Apple, Netflix, Facebook, Google etc… shoot up double or triple in price in the past few years and all the talk about the HOT Internet Start-up companies like Uber will definitely cool down.
You can never be 100% sure but it will be tough for 2016 to outperform 2015 in terms of stock market returns. We could even see a global stock market correction or more modest returns in the next few years. One sector we are watching carefully is if the US and Global Economy is indeed recovering, we need to see rising commodity prices in Oil, Cooper and industrial materials. So far, we’ve only been seeing falling prices and a weak commodity sector.