While we are off to one of the worst starts to the year ever many wonder can US stocks still have positive returns in 2016? As the market is down roughly 10% year to date, it is reasonable to assume that if you're not 100% in cash or CDs most investors are losing money. Why?
Many attribute this volatility to China and oil prices. In January, the Chinese decided to simply "turn off" their stock market as if they were turning off the lights. Not to mention they tinkered with their currency which combined was a distress signal to the world that the second largest economy is the world in slowing rapidly. In reality, Chinese goods comprise less than 1% of US GDP. In my opinion, our economy is not heavily impacted by China rather should see them as white noise. But what about oil?
While we all love paying lower prices to fill our gas tanks, many oil companies are struggling with prices falling to a 13 year low. The drillers and exploration companies are experiencing hard times but the big names with strong balance sheets, like Exxon and Chevron, are doing just fine. It is reasonable to anticipate that oil prices will normalize- we just don't know when.
What should investors do?
- Stay Put- do not focus on six and twelve month performance. Keep your head down, ears open, and focus on the long term. With high quality investments, dividends reinvesting, and a well-structured plan staying the course will most likely pay off. Consider that over every 15 year period since WWII, the US stock market has made money for investors.
- Talk with your advisor- if you're uneasy pick up the phone! Attentive advisors will have already called you. Our job is to know what's going on in your life, know how you're feeling about your investments, and modify as needed. Advisors bring one thing you can never give yourself, perspective.
While I do not have a crystal ball nor can I make the call on a bull or bear market in 2016, you may consider that in 2015 the S&P 500 index lost 0.7% but actually gained 1.2% if your dividends were reinvested. Keeping a cool head and operating with facts and knowledge during this time will serve you well.
Caroline Hill, Financial Advisor
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).