By Haddon Libby
Since the financial crash of 2008, investors have had six years of solid returns that replenished their accounts so long as they had stayed invested throughout. This year was markedly more difficult as investors had few areas in which to invest and achieve positive results.
The S&P 500, which is a stock market index that tracks the results of the 500 largest publicly traded companies on the New York or NASDAQ stock exchanges, was down approximately 3% for the year (as of December 20th). This means that $100 invested in those 500 companies at the start of the year would now be worth $97. The general consensus amongst most industry prognosticators is that this index will increase by 5 – 8% in 2016. If this is accurate, $100 at the start of 2015 would be worth about $102 by the end of 2016.
An oft-quoted market guidepost is the Dow Jones Industrial Average. This index has been around is 1896 and consists of thirty large publicly traded companies. Of the 30 companies currently in this index, General Electric was first in the average in 1896 while Apple was just added in March of this year. For 2015, this index is down nearly 4%.
The Russell 2000 tracks the 2,000 smallest of the 5,000 largest publicly traded companies in the United States. The median market value of these 2,000 companies is $528 million (half of the companies have a greater market value while half are smaller). For 2015, this index was down approximately 7%.
Worth noting, Russell Investments is a Seattle-based subsidiary of the London Stock Exchange.
Looking around the world, the 100 largest companies in Europe are down nearly 8% in value for the year as are the stocks of the Hong Kong Stock Exchange (Hang Seng).
Given the beating that Russian stocks took in 2014, the MICEX index is up 23% for the year. This might be why Putin is a touch less disagreeable at the moment.
Chinese stocks are up over 10% for the year as gauged by the Shanghai Composite.
The top 30 publicly traded French companies are up 8% while the top 40 German companies are up 8%. Canadian stocks are off 11% and Brazilian stocks down 12% while Mexican stocks are essential flat.
Relative to the US Dollar, most currencies declined in value during 2015 with the Euro down 10%, Canadian Dollar off 17%, Mexican Peso 14% and Chinese Yuan 4%. What this means is that US goods are more expensive on a relative basis over the last year making exports more difficult.
Looking at commodities, oil is down 42% for the year due to production glut yet refined gas is down only 10%. Natural gas was hammered this year with a 50% decline, gold down 10%, copper 28%, corn 13%, wheat 21% and sugar 8%.
Another way that many people look at investments is on a sector basis. As an example, the best performing sector for 2015 was ‘consumer discretionary’ which is up approximately 7%. Consumer discretionary companies are those that sell nonessential goods to you and me. Hotels and automobiles are classic examples of discretionary items. Healthcare companies increased in value by 3% for the year while technology companies were up by almost as much. The worst performers were energy companies which were down 25%, basic materials/commodities off 12% and utilities down 10%.
Lastly, some people look at their investments by classification into three categories – large, medium and small. Generally speaking larger companies (down 2%) did better than smaller companies (down 7%). Within that, growing companies did better than value companies (undervalued stocks or low growth dividend paying companies). Large growing companies did the best (up 4%) while small value-oriented companies performed the worst (down 10%). Many prognosticators believe that the value-oriented companies will outperform the growth companies in 2016.
Haddon Libby is Managing Director of Winslow Drake, an investment management practice, and can be reached at firstname.lastname@example.org.