Volatility may best describe the equities markets for the majority of 2015, as they were impacted by economic stress in China and Greece, coupled with underwhelming corporate earnings reports, falling oil prices, and terrorist attacks here and abroad. While some economic sectors, such as housing and labor, offered favorable news, others, including exports and wages, showed little in the way of positive movement. Nevertheless, despite inflation running below the Fed's target rate of 2.0%, there were enough signs of overall economic growth to prompt the Federal Open Market Committee to raise interest rates in December for the first time since 2006.
Of the indexes, only the Nasdaq posted a year-on-year gain. Not even a fourth quarter rally could bring the other indexes into positive territory for the year.
U.S. Treasuries also saw prices fall during the fourth quarter. While Oil prices (WTI) continued to decline, dropping from $46.36 per barrel at the end of the third quarter to $37.07 per barrel at the end of the fourth quarter. Gold, meanwhile, also felt the effects of the global economy; finishing the fourth quarter at roughly $1,060.50 an ounce compared to $1,114.50 an ounce at the end of the prior quarter. Finally, not all falling values are necessarily bad, as the average retail price of a gallon of regular gasoline fell $0.29 to $2.034 at the end of the quarter.
Our 2016 outlook is dominated by the same themes that prevailed during the second half of 2015. Domestic demand is expected to remain strong, particularly in the first half of the year, but overall growth is likely to be restrained somewhat by the impact of sluggish global growth and a strong dollar. The pace of Fed rate increases is expected to be gradual and reflects an economy moving toward its long-term potential. Even with higher short-term interest rates, Fed policy should remain accommodative over the course of 2016. The longer-term outlook for emerging economies is still promising, but the post-recovery pace of growth is likely to be lower than expected a few years ago.
To view the Raymond James 2016 Outlook click HERE
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