The Best Investments To Hold In 2016

As usual, none of Wall Street’s so-called “top strategists” in a recent Barron’s survey are calling for stocks to decline in 2016. All of them are calling for the bull market to continue next year.

Their 2016 S&P 500 forecasts varied from a groupthink low of 2,100 (Goldman Sachs’ David Kostin) to a groupthink high of 2,500 (Federated Investors’ Stephen Auth). Most of the rest were crowded around 2,200.

My own forecast practically puts me off this chart altogether.

Anyone who challenges the incessant bullish consensus is invariably accused of being a “permabear,” but that moniker does not apply to me.

I learned a long time ago that my job is to take the world as it is, not as I would like it to be. That’s the promise I make to my clients and to my readers. Sometimes that will mean I’m bullish, as I was in 2013 and 2014, and sometimes it won’t, but it’s always based on my assessment of the world – not hopes or prayers.

I figure if you want to feel cozy, you’ll watch the pap that the financial news channels feed to their viewers to keep them tuning in and the advertising dollars rolling in. Of course, that didn’t serve you well in 2015, and it certainly won’t in the next 12 months.

Here’s my complete 2016 market forecast.

Spforecasts

2016 S&P 500 Year-End Target: 1,875-1,900

Euro Range: $0.98-$1.10

Yen Range: 120-145

10-Year Treasury Range: 1.8%-2.6%

U.S. GDP Growth: 2.0%

U.S. Presidential Election Winner: Marco Rubio

Based on where the S&P 500 closed yesterday (2,078), I expect it to end 2016 down 10%.

Not a “Permabear”

At the beginning of both 2013 and 2014, I called for the S&P 500 to rise in the following 12 months, which it did.

But in January 2015, after watching oil and the rest of the commodities complex collapse over the second half of 2014 in concert with China’s slowing economy and the demise of the weakest segment of the high-yield bond market (CCC and B-rated bonds), I concluded that the end of the post-crisis bull market had arrived.

Having correctly called the credit crisis of 2001-2002 and the financial crisis of 2008-2009, I saw similar warning signs suggesting that investors should protect their assets.

I continue to believe that we are in a bear market and that 2016 will bring more pain, especially for investors who believe markets can defy the headwinds that buffeted them in 2015 and continue to blow hard.

I believe we’re in a stealth bear market that began in late 2014 after China’s economy began to weaken, the global commodity complex began to collapse, and the Fed signaled the beginning of its current tightening cycle with the end of QE.

I argued a year ago that the rule that bear markets do not begin without a recession or the Fed initiating an aggressive tightening cycle (which it clearly hasn’t done and won’t do) should be questioned at the zero bound.

I believe that market behavior has proven me correct; again, much of the market is already in a stealth bear market disguised by the performance of the cap-weighted indexes.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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