In January of 2016, I became increasingly interested in the global market(s). I’ve learned a lot in just one year about how trading works, the technical analysis, why the economic factors create the results that they do, among other things. With that, I want to briefly recap and reflect on a few of the major market events in 2016 and what I see for the new year.
Let me begin by regarding Brexit. Brexit is a term used for The United Kingdom (Great Britain) exiting the EU (European Union). Their withdrawal, much like the 2016 US election, was not projected by pollsters. It was an unprecedented surprise that sent a ripple, not only across the NYSE (New York Stock Exchange), but globally. Initially, uncertainty among investors dug a crater in the major US indexes. However, prior to the dip, stocks rebounded as analysts projected a subtle impact on the future of markets.
Another area of focus for me in 2016 were the Emerging and Frontier global markets. These derive from under developed countries like Kuwait, Argentina & India, among others. They present great investment opportunity. I say that because they could hold the keys to the future of our global economy. However, political/economic uncertainty makes selection relatively risky. I recommend finding a strong ETF if you want exposure.
Now let’s consider an event that whole world had their eyes on, the 2016 Presidential election. It was a turbulent ride full of accusations, scandals and, in my opinion, a whole lot of entertainment. That’s not the point though. I want to point out how much volatility it created in the fourth quarter of 2016. Leading up to Nov. 8th, there was great uncertainty among investors as to where they should dump their cash based on the potential policy in Washington D.C. A surprising victory for Donald Trump over Secretary Clinton was just the beginning of what turned out to be, a bullish year-end run. Post election, The DJIA surged to new benchmarks, set winning streaks and now sits just south of its high at 20,000, up 13.4% on the year. Pretty good for a year that recorded its worst January ever. For those of you who don’t know, DJIA is an acronym for Dow Jones Industrial Average. It’s an index on the New York Stock Exchange, that tracks thirty major companies on a price-weighted average. So essentially, if you ever want to see how the market is doing, in general, take a peak at the DJIA, Nasdaq or S&P 500. These are the big three indexes in America.
Anticipation of Trumps policies, spending, tax cuts and are, for the most part, to thank for gains on Wall Street. But, he is still President-elect Donald Trump. Will he be able acquire a budget that’s in alignment with his infrastructure plans? Will he shun the renewable energy sector? Will the Health Care industry get back on its feet with an aging population, the “repeal & replace of Obamacare”, and an limitation of price caps on drugs? Will Janet Yellen be replaced at the Fed? Will inflation dramatically suppress purchasing power? These questions are for your consideration because virtually nobody knows the true answer to them. Time will tell the narrative.
Lastly I want to reflect to the best of my knowledge which industries, I believe will thrive, and which ones will dive this year. First and perhaps the most relevant to our lives is technology. I think 2017 will be chalk full of M&A. For instance, a competitive advantage among FANG (Facebook, Apple, Netflix & Google) has shaped high barriers to entry. As companies like FANG compete, they’re seeking acquisitions that can help push them ahead of competitors. It seems like Tesla has the advantage in self-driving cars. But they have a lot of debt and rising competition. Google and Apple also are working on a self-driving car. The catch with them, is that they have more cash flow than they know what to do with. Could one of the two make a bid for Tesla? Will Facebook evolve from just a social media platform into something bigger? I think Zuckerberg has big plans for FB. But with Snap Inc.’s IPO this coming year, should Facebook be worried? Next I expect cyber-security companies to mature. As we’ve seen recently, hacking has become a norm internationally. Potential for threat is huge; therefore, companies like IBM need to innovate quickly to provide protection from breaches. I expect infrastructure and construction companies to thrive as well. With Trump’s fiscal stimulation plans, its inevitable we will see growth here. But how much exactly? There is even bigger potential for Bio/Nano-tech, Pharma & Health Care companies. While technology advances, medical treatments are becoming more effective; but at the same time, more expensive. With higher drug prices, increasing overall costs, advancement in genetic modification, a limited number of Health Care networks/plans for consumers, etc., I see these industries to have significant potential in terms of growth, throughout 2017 and beyond.
As I’ve come to realize, there is a lot going on, “out there”. I admit, much more than I can keep up with. But, staying in touch with my surroundings and self educating myself at least a little bit every day, has compounded to be something great. It doesn't have to be the stock market; but find something that you’re really interested in, and self-educate yourself on it. Strive to be an expert.
-AE
