“Volatility Helps The Market Fizzle!!” – 2015 Year End Review
January 13, 2016 by admin
Happy New Year! All of us at Orange Capital Management hope you and your family had a wonderful and joyous holiday season.
For us, it was business as usual. We are still enjoying our new “digs” and continue to grow our team to better serve you. We had a wonderful time at our Client Breakfast event; in fact, it might have been one of our best. Thanks again for all who were able to attend. We are excited for 2016 and all the opportunities the New Year could bring…so let’s get started.
We will start by giving you a “Readers Digest” view of 2015. The U.S. stock market took investors for a wild ride during the year. But, in the end it was a trip to nowhere. The stock market ended the year with most major indexes negative, delivering the weakest performance since 2008. The Dow Jones Industrial average was down -2.2%, the Standard & Poor’s 500 index at -0.7%, and the NASDAQ index finished the year up 5.7%. The 6 year-old bull market stalled out as most major indexes posted losses for the year. That really disappointed all the optimists. But pessimists also came away unsatisfied because the market’s declines were generally modest. If we map it out, you can see the crazy ride. In January, we got off to a slow start as investors worried about falling crude oil prices, flat earnings, and rising interest rates. By May, most major indexes were hitting new highs based on U.S. creating new jobs and consumer confidence improving. By August, anxiety about slow growth in China and further drop in oil took the major indexes into about an 11% correction. This is the first time we had seen this in four years. By September, the market had mostly bounced back. Then December came, and instead of a Santa Claus rally, we got a lump of coal. Most major market indexes slipped back into the red.
Now, for some good news. The fact that the Federal Reserve elected to increase short-term interest rates for the first time in nine years is a huge vote of confidence. Increasing rates is a reflection that they are confident that the U.S. economy is on healthier ground. Additionally, domestic equities have historically performed well when interest rates have started to rise.
Overall, expect markets to continue to vacillate, especially if earnings decline and interest rates rise. Whileforecasters and economists will change their predictions from one day to the next, our one constant is that we have a solid game plan and a proper, well thought-out strategy. Our best recommendation is to not let short-term economic events derail your long-term strategy. In closing, we remain optimistic for the long-term, albeit always cautious over the near term. Keep an eye on the first quarter of 2016. It may very well begin to tell the tale of the next chapter … Even though it won’t matter to your long-term strategy.
As always, we consider it a privilege and honor to work with you and your family. We look forward to seeing you at our next review or client event. Please feel free to forward this letter along to your family, friends, and colleagues that you feel we can be of service to. Again, thank you for your business and friendship throughout the years. And a special welcome to all the new clients that joined us this year. Best wishes to you and your family for the New Year.
1 Los Angeles Times – December 31, 2015
2 Los Angeles Times – January 1, 2016
3 Orange County Register – January 1, 2016
4 Wall Street Journal – January 1, 2016