6 Predictions for 2016

It seems like every year we have more and more Wall Street analysts coming out with ridiculously optimistic projections for the year even though worrying signs are staring them in the face.  2015 was no different, however the markets did not deliver those rallies.  So what is a Wall St. analyst to do?  Scratch out 2015 and put 2016 on that list, at least that is what quite a few did.

Northman Trader put together a great summary image of Wall St projections for 2015 and 2016.

Northman Trader

Even though global economic growth was slowing, earnings estimates were being revised down and inflation was nowhere to be found, S&P projections largely remained constant.  The one analyst that was pretty right was Nuveen’s Bob Doll who expected a fairly volatile year.

This really does beg the question, does Wall St paint a rosy picture in order to attract capital? If so, they have done a horrible job as $61 billion had flown out of mutual funds through November 2015. (Source: ICI.org)

In either case, the analysts and economists that I follow have had more cautious views for 2016 compared to their 2015 outlooks. This inspired us to write our own 2016 Predictions.

6 Predictions for 2016

1. US GDP will once again be tepid, remaining under 3%.
2. Inflation will remain under the Fed’s 2% target, as lack of wage growth and low energy prices keep prices low.
3. Oil prices to average under $45, perhaps with a short spike or two if geopolitical issues break out.
4. S&P 500 will finish flat or down for the year, with a likely sell off of 10% or more.
5. 10 year US Bonds to finish under 2% in an overall flattening yield curve.
6. US Economy enters recession during Q3 or Q4 of 2016.

Stay tuned as we discuss our predictions in more detail in the near future.