The world of stocks in 2015 will be remembered as a year with a high degree of volatility and ultimately little to no change in the S&P 500, with it recently closing in tight proximity to where it began the year. The year was full of upside breakouts with no meaningful follow throughs, followed by sharp moves on the downside to new low ground, only to reverse back to the middle of the range. What this has led to is investors having too much cash at the top of these trends and too little at the bottom. This type of action is a form of correction in which, even though the end result was little change in the market, investors feel as though they have lost money. This type of sentiment can be bullish for the market.
Looking forward to 2016, I don’t expect the stock market to remain in this trading range. However, at this point we find ourselves back in the middle of the range with little idea as to the direction of the next trend. The one thing I am confident in is that once the market breaks out convincingly from this year’s long trading range, to one side or the other, it will likely determine the direction of the intermediate term trend. That said, with the economy improving noticeably, albeit not dramatically, the widely anticipated move up in interest rates now behind us, and US corporations only needing to outperform the low expectations set in lackluster 2015, the more likely scenario in my opinion is that the markets will break out on the upside, resuming the uptrend that began in 2009. Only time will tell.
Wishing all a prosperous 2016!
President / Senior Portfolio Manager
Disclaimer: Rocket Capital Management, LLC is a registered investment adviser. The comments presented do not constitute personal advice and are not intended to be a solicitation for the purchase of any individual securities or investment strategies. All investing involves risk. Please consult with a registered adviser before making any investment decisions.