Revisiting My Five 2016 Stock Market Predictions

About a year ago at this time, I penned (er, keyed) an article titled, “Five 2016 Stock Market Predictions Sure to Be Wrong.” The idea was, I presented five popular stock market predictions for the upcoming year … and then told you why I thought those predictions would be wrong.

Well, it’s easy to make predictions sitting behind a desk, hope people read it, and then hope people forget it—especially if those stock market predictions turn out to be horribly wrong. So, in the interest of holding myself accountable, I thought it might be a fun exercise to see how I fared a year later.

Again, the following five stock market predictions were commonly held among Wall Street pundits this time a year ago. Being a contrarian, I thought the opposite of these predictions would be true.

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Let’s see how I did:

2016 Stock Market Prediction #1: Stocks won’t rise at least 10%.

I believed stocks would rise 10% in 2016. This one might come down to the wire, but with two weeks left in the trading year still to go, it looks like I’ll be right.

The S&P 500 bounced back nicely this year after a rough 2015, rising 10.7% as of this writing. Mind you, things weren’t looking nearly as peachy about six weeks ago. Then Donald Trump was elected President, pre-election investor angst dissolved, and markets have advanced well into record territory since.

They could still backtrack these last couple of weeks, especially now that the Fed hiked interest rates for the first time in a year. But I doubt they’ll dip below the double-digit annual return few expected.

2016 Stock Market Prediction #2: Apple (AAPL) won’t bounce back.

Investors were quite down on AAPL after the stock slipped 5% in 2015. Few loved the stock any more as a long-term play—like International Business Machines (IBM) and Microsoft (MSFT) before it, the stock has reached “peak popularity,” as our company President Timothy Lutts called it. And I agreed.

But I figured AAPL had one last short-term gasp in it this year, and turns out I was right. Apple stock is up more than 10% year to date, in line with the rebound in the S&P but ahead of the 2016 return (8.9%) in the Nasdaq. Being in lockstep with the market isn’t a major accomplishment. But it sure beats a 5% decline!

2016 Stock Market Prediction #3: Energy prices will rise.

In this case, the pundits were right, and I was wrong.

Energy prices have bounced back this year, with crude oil topping $50 a barrel after starting the year below $40 a barrel. Natural gas prices have risen even further. OPEC’s decision last month to cut production for the first time in years has helped spur an end-of-year rally in oil and energy stocks—the Vanguard Energy ETF (VDE), whose holdings include Exxon Mobil (XOM), Chevron (CVX) and Kinder Morgan (KMI)—is up more than 27% year to date.

Mea culpa.

2016 Stock Market Prediction #4: The Presidential Election will wreak havoc on the market.

I was right on this one—aside for about five or six hours when Dow Futures plummeted 800 points on Election Night, the election did not wreak havoc on the market, as evidenced by the 10% return this year. Now, I would say the election held the market hostage prior to November, as stocks scarcely budged in August, September and October as investors patiently waited for a result.

But as I wrote a year ago, “It’s the uncertainty that causes investors to panic and sell out of certain positions. Once the election is over, no matter who is elected (okay, Trump could be a whole different animal), panic subsides and people start buying stocks again.”

Well, Trump was elected, and stocks have been on a tear anyway. Except for a few hours on the night of the election, hardly anyone on Wall Street panicked.

2016 Stock Market Prediction #5: Fed rate hikes will continue to rattle the markets.

The financial media got this wrong on several levels.

First off, there were no rate hikes plural, just one—and it happened last week. And that increase in the federal funds rate, by a quarter of a percent, has done little to rattle markets so far. While there may have been some investor angst about the rate hikes in recent months, angst over who would win the presidential election likely trumped (no pun intended) it.

The first rate hike, last December, sent markets spiraling downward for a couple of months. That could happen this time … but it probably won’t happen in 2016! Plus, investors don’t seem to be as bothered by it this time around, which is what I predicted a year ago.

I wrote that “investors won’t care nearly as much about the Fed’s every move as they have the last few years.” It’s not that they didn’t care; it’s that they cared about other things (namely the election) more.

Final Tally 

So, if you’re scoring at home, four of the five commonly held stock market predictions for 2016 were wrong, which means four of my five contrarian predictions were right!

Quick math tells me that’s an 80% success rate. That would great if I was buying stocks (alas, I wasn’t), and about average if I was taking a test. Regardless, I’ll take it!

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