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BUSINESSMonday 28 December 2015
Wall Street Wrap:
Expect less and buy antacid: 2016 investment forecasts
STAN CHOE expectations is long. Eco- acteristic of past market price and longer-term
AP Business Writer nomic growth around the peaks, such as the dot- earnings trends popular-
NEW YORK (AP) — Invest- world remains frustratingly com bubble, may not be a ized by economist Robert
ing is becoming more of a weak, and earnings growth problem. Shiller, a Nobel prize winner,
grind. Expect it to stay that for big U.S. companies has “We think investors will be is also more expensive than
way. stalled. Stock prices aren’t rewarded over the next its historical average.
Analysts, mutual-fund man- cheap when measured five to 10 years with decent These already high stock
agers and other forecast- against corporate earn- inflation-adjusted returns,” prices leave little room for
ers are telling investors to ings, unlike the early years said Joe Davis, global head them to rise further with-
expect lower returns from of this bull market. The Fed- of the investment strategy out some impetus from the
stocks and bonds in 2016 eral Reserve also just lifted group at mutual-fund gi- economy or better profits.
than in past years. They’re short-term interest rates ant Vanguard. “That said, Investors should also brace
also predicting more se- for the first time in nearly a they will likely pale in com- for dips. The market’s big
drop in August was so rat-
Trader Andrew Silverman, center, works on the floor of the New York Stock Exchange. Analysts, tling because it hadn’t
mutual-fund managers and other forecasters are telling investors to expect lower returns from happened since October
stocks and bonds in 2016 than in past years. 2011, an abnormally long
time. Since World War II, in-
(AP Photo/Richard Drew) vestors have been hit with
drops of at least 10 percent
vere swings in prices. Re- decade. Besides making parison to the strong returns every 19 months, on aver-
member that 10 percent all kinds of markets more we’ve had over the last age.
drop for stocks that freaked volatile, higher rates could five.” Goldman Sachs strategists
investors out in August? It also hurt prices of bonds Here’s a look at how ana- are forecasting the S&P 500
likely won’t take another in investors’ and mutual lysts see investments shap- will end 2016 at 2,100, which
four years for the next one. funds’ portfolios. The invest- ing up in 2016: would be a 4 percent rise
The good news is that few ment-bank Barclays gave from Monday’s close of
economists are predicting this succinct title on its 100- US STOCKS 2,021. Barclays expects the
a recession in 2016. That page outlook report for Corporate profit growth hit index to rise 9 percent, and
means stocks and other 2016: “Curb your expecta- a wall this year, as plung- Deutsche Bank expects it
investments can avoid a tions.” ing prices of oil and metals to rise 11 percent.
sustained slide and keep While it’s worth knowing slammed energy and raw- All would be a step down
grinding higher, analysts the general sentiment on material producers, the from past results. The S&P
say. Next year is expected Wall Street, it’s also worth stronger dollar hurt export- 500 gained 15 percent an-
to look more like this year, remembering financial ers, and economic growth nually on average from
with gyrating stock prices forecasters have a spotty remained tepid. Analysts 2009 through 2014, not in-
on track to end close to record for accuracy. expect profits to stabilize cluding dividends.
where they started, than Analysts cite a long list next year, but companies
the bull market’s euphoric of risks that could upend across many industries are FOREIGN STOCKS
earlier years like 2013 and their forecasts. Investments groping for revenue growth Investors have a strong
its 32 percent surge in the could tank if an unexpect- amid the still-slow global yen for foreign stocks. They
Standard & Poor’s 500 in- ed spike in inflation rips economy. poured a net $208 billion
dex. “You have to be real- through the global econ- Stocks in the S&P 500 are into international stock
istic and think the outsized omy, for example, or if the no longer cheap relative funds in the last year, while
runs we’ve had — in 2013, slowdown in the world’s to their earnings, the most pulling $56 billion from U.S.
for instance — are pretty second-largest economy, common gauge of stock stock funds.
unlikely,” said Mike Bar- China, ends up even more prices. The index is trading One reason for the migra-
clay, portfolio manager at severe than feared. at 17.2 times its earnings tion is that investors want to
the Columbia Dividend In- But there is some comfort over the last 12 months, make their portfolios look
come mutual fund. “Trees in the subdued forecasts higher than its average of more like the broad mar-
don’t grow to the sky.” — they are a sign that the 14.5 over the last decade. ket. Foreign stocks make
The list of reasons for muted greed and mania char- A measure that looks at up about half the world’s
market value but are often
just a sliver of 401(k) portfo-
lios. Also, central banks in
Europe, Japan and else-
where are pumping stimu-
lus into their economies
to drive growth, when the
Federal Reserve is moving
in the opposite direction.
And earnings growth in
Europe and other regions
looks to be accelerating
more strongly. Dale Winner,
portfolio manager at the
Wells Fargo Advantage In-
ternational Equity fund, ex-
pects profits for European
companies to grow in the
neighborhood of 15 per-
cent. For U.S. companies,
meanwhile, he’s expecting
close to zero growth.q
