crystal-ball

It’s a new year and that means another flood of predictions from the prognosticators, from retail traders to Wall Street. As I did for my 2015 predictions,  I hope to cast a wide enough net that I’ll be praised for one correct prediction while the rest of my wrong predictions will be forgotten. This is only standard practice in the art/science of professional prognostication.

Without further adieu, here are my #2016Guesses 

  • The US Dollar Index will make new highs in 2016, but only marginally. Those thinking that the dollar will surge with the Fed hiking interest rates will be proven wrong, as the majority of the move already occurred in 2015 (Wrote about the “King Dollar” theme last year).
  • Drawing on another theme from last year, I’m reiterating my all-mighty prediction that Gold will trade below $1000/ounce. Gold was down over 10% for 2015 and briefly traded below $1,050. A $1,000 handle is about 7% from where it sits currently. That doesn’t seem too unreasonable to me.
  • Oil won’t make major new lows in 2016. Of course I said this last year and was admittedly wrong…by a lot. But as the crystal ball handbook says, I’m disregarding my wrong predictions.
  • @BruniCharting will drop his first mix tape, and it will be dope.
  • Donald Trump will reveal his whole presidential campaign was a ruse for his new reality TV series “Being President” which will debut on Netflix.
  • There will be increased market volatility. This is kind of an easy one to throw out there considering the wild action we saw during late summer. You hear pundits talking about how the rate hike(s) spell disaster for the market, and earnings, etc. I’ll just guess the VIX closes back above 30 for the hell of it.
  • My 2016 year-end price target for the S&P 500 Index (SPX) is 2,300. Based on the closing price of 2,043.62 as of December 31, 2015, this represents a 12.5% upside target. I actually have some data to backup my reasoning (but don’t get used to). As you know by now, the S&P 500 closed down for the year during 2015 not including dividends, albeit marginally. I ran a simple study in Excel looking what happens, on average, the following year when the S&P 500 (SPX) closes down for the year. As you can see from the results below, prior to 2015, there had been 17 negative years in the S&P 500 since 1950; 11 since 1970; and 7 since 1990. What’s really interesting is that the average and median returns are higher after a down year, with the maximum drawdown (min) being lower as well. This is true since 1950, 1970, and 1990. While this study unfortunately doesn’t give a definitive year-end price target, I’ll go out on a limb here and now and say the S&P 500 closes up double digits during 2016.

SPX Yearly Returns Following Prior Down Year Since 1950

SPX Yearly Returns Following Prior Down Year Since 1970

SPX Yearly Returns Following Prior Down Year Since 1990

 

 

I’ll check back in another year and see how these infallible guesses play out.

Let me know if you have any questions or comments.

Jake

2016 Guesses
Tagged on: