A review of the events of 2016 (Domestic and International):
- The year began with a sharp market correction ending around the middle of February.
- The British, in a surprise result, decided to exit the European Union (Brexit) in June.
- After a one year pause, the Fed raised interest rates again in December 2016.
- The U.S. held their Presidential election in November.
U.S. & International Economics:
- Globaleconomies are growing, albeit slowly.
- The Fed Funds Target Rate now sits between 0.50% – 0.75%; up from the lows of 0.0% – 0.25%.
- The U.S. unemployment rate fell to 4.7%; its lowest level since August 2007.
- S. GDP Growth is expected at slightly more than 2% for 2016.
- The European Central Bank is extending its monetary easing program.
- Inflation pressures are slowly rising globally.
- The Chinese outlook continues to be challenged, but not dire.
- Despite a new stimulus program, Japan’s economy is struggling with 1.3% GDP growth.
Markets (see Equity Index Returns chart):
- There were winners and losers in 2016.
- Precious Metal equities were the top performer for the year, although they retreated in the fourth quarter of 2016.
- The other winners included Energy stocks, Small Caps, Utilities and Large Caps.
- Europe and Healthcare stocks lagged in 2016.
- Foreign bonds did well as international interest rates had downward pressure.
- A new administration will begin shortly, along with a Republican Congress.
- There is a possibility of some tax cuts in the future which should provide some stimulus to the economy.
- The Federal Reserve’s policy is expected to continue increasing interest rates.
What Happens Next:
- Domestically, we are maintaining our viewpoint that there is little indication of a recession on the horizon. In fact, there is every indication of modestly improving GDP growth.
- The international markets should have some good growth opportunities as a result of low interest rates (and a steep yield curve), stimulus, and favorable currency translations.
- We believe that the Fed will continue to raise rates, albeit slowly, into the future.
With all the above data points, we see much to be positive about economically worldwide. Continuedgrowth should bode well for the stock markets globally. There is little chance of an economic recession occurring, and thus, we continue to maintain a bullish stance moving forward.
Please let us know if you have any questions on the overall strategy and holdings in your personal portfolio. We are always happy to chat about your individual financial situation. As always, we greatly appreciate the confidence you have shown in our services. Thank you for your business!
Bijan Golkar, CFP®