Home' Trinidad and Tobago Guardian : December 31st 2015 Contents BG10 US STOCKS: YEAR IN REVIEW
BUSINESS GUARDIAN www.guardian.co.tt DECEMBER 31 • 2015
The stock market took investors
for a wild ride in 2015, but in
nowhere. Despite veering
between record highs and the
steepest dive in four years, the
stock market is on track to end the year essen-
tially flat. That means if you invested in a fund
that tracks the Standard & Poor s 500 index,
you have little to show for the past 12 months.
"It s been mildly disappointing," said Michael
Baele, managing director at the Private Client
Reserve at US Bank. "Any time that you come
in toward the end of the year close to flat you
always want a little bit more."
The market got 2015 off to a slow start as
investors worried about falling crude oil prices,
flat earnings growth and when and how quickly
the Federal Reserve would begin raising interest
By May, the major indexes were hitting new
highs. Even the Nasdaq bested its dot-com
high-water mark set in March 2000.
The market didn t stay in milestone territory
for long, though.
Worries about slowing growth in China and
elsewhere gave reason for the Fed to pause
and for investors to fret, even as the US econ-
omy continued to create jobs and consumer
confidence improved. Weak company earnings,
largely due to the strong dollar and falling oil
prices, didn t do much for the market s con-
By August, the anxiety had deepened and
the market dropped sharply. The three major
US indexes went into a correction, commonly
defined as a loss of at least 10 percent from
a recent peak, for the first time in four years.
That slide didn t last long, either.
Within several weeks, the market had mostly
bounced back. The Nasdaq composite returned
to positive territory for the year, while the
Dow average and S&P 500 remained slightly
in the red until December.
In the weeks that followed, the S&P 500
inched back into positive territory, leaving the
Dow as the only major market indicator neg-
ative for the year.
Including dividends, the S&P 500 is on track
to return two per cent, following a return of
13.7 per cent in 2014.
"There was a lot of news that kept hitting
the market and the market kept shrugging it
all off and hung in there," said JJ Kinahan,
chief strategist at TD Ameritrade. "I d say,
given all that the market faced this year, it
was pretty strong."
These were some of the key factors driving
markets in 2015:
Waiting for the Fed
Wall Street watched few things more closely
this year than the Federal Reserve. Traders
had been predicting early on that the central
bank would begin raising its benchmark interest
rate as early as March. When that didn t hap-
pen, investors turned their focus to June, only
to be disappointed again.
Eventually, in December, the Fed took action.
It nudged its benchmark overnight borrowing
rate higher, its first increase in interest rates
in nearly a decade.
The Fed made it clear that it was expressing
a vote of confidence in the U.S. economy by
doing so and that future increases would be
gradual. That helped reassure investors that
the Fed wouldn t raise rates too quickly and
thereby stunt the economy s growth.
"It really was central banks looming large
over the market," Baele said. "The market had
a fair amount of fear that the Fed raising rates
was a risk to the market. It s turned around
The bull market had racked up six years of
annual gains by the time the calendars turned
to 2015. The last time it had a correction was
2011. Historically, that s an unusually long
time for the market to go without a meaningful
pullback. That plus a string of record highs
in late 2014 led many to think the market was
overdue a drop.
The long-awaited correction finally arrived
in August. Late in the month indexes dropped
sharply as investors worried that a slowdown
in China s huge economy could spread to other
Yet after an 11 per cent plunge between
August 17 and 25, and another, less steep drop
in late September, the market began to struggle
higher. By late November it had recouped all
the losses from its late summer swoon.
Once investors determined that China s
slowdown would not spillover to the US and
European economies, "then we had a very
rapid recovery from that very sharp decline,"
Jeremy Zirin, chief equities strategist at UBS
Wealth Management Americas.
A big reason why the market finished flat
in 2015 is that company earnings growth has
also been largely flat.
That was due primarily to the impact of
falling oil prices on energy sector earnings.
Also, the rapid appreciation of the dollar con-
strained earnings for companies that do a lot
of business overseas.
As a result, earnings growth for companies
in the S&P 500 index went from seven per
cent in 2014 to essentially zero in 2015.
Excluding energy, earnings for the rest of
the S&P 500 would be up about seven per
cent this year, Zirin said.
With so few companies producing mean-
ingful growth, investors homed in on those
"If you look at the S&P 500, for example,
those top 10 companies provided almost all
of the return," Baele. "So it s really kind of a
rotation out of value, dividend-paying stocks,
which had worked so well for years, to now
growth has taken over in 2015."
The US economy didn t do the stock market
any favours in 2015.
It expanded at a slight 0.6 percent rate in
the first three months of the year, depressed
by unusually severe winter weather and dis-
ruptions at West Coast ports. The economy
revved up in the next quarter, growing at an
annual rate of 3.9 per cent, but slowed to a
gain of 2.1 per cent in the July-September
Consumer spending remained a bright spot,
however. That s one reason why consumer
discretionary stocks, a category that includes
big retailers and car makers, were the biggest
gainers in the S&P 500.
AP's Alex Veiga
In this Wednesday,
December 16, 2015, file
photo, Federal Reserve
Chair Janet Yellen's
conference is shown on
a television screen on
the floor of the New
York Stock Exchange.
Wall Street watched few
things more closely this
year than the Federal
Reserve. Despite veering
between record highs
and the steepest dive in
four years, the stock
market is on track to
end the year essentially
US stocks are ending 2015
mostly flat, capping volatile year
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