Looking Ahead To 2016

2015 is drawing to a close and financial investors are trying to understand past global dynamics in order to move forward into 2016. Investors expected a good year for euro zone stocks in 2015 looking forward to European Central Bank president Mario Draghi and a massive stimulus plan to draw good returns from the region.

By mid-year, it was certain that these predictions were not going to materialize as the pan-European FTS was dragged down by a combination of the uncertainty in China, plummeting oil prices, and looming U.S. interest rate rise fears, factors that contributed to a monthly loss of 9 percent in August alone.

By mid-September, global equity markets recovered somewhat with European stocks back on track and set to post gains of around 6 percent by the end of the year.

Some analysts expect the trend of U.S. equity leadership to flip in 2016 and for international equities to begin to outperform in both local and common currency terms. They point to a record high level of U.S. profit margins and tempered earnings growth as a reason to look outside the country to places such as Europe, Japan and China as avenues for garnering greater returns.

Helping it along is the ECB announcement at its December meeting that it was making a number of changes to its 60 billion asset purchase program and cutting its key deposit rate further into negative territory, in an effort to slow down its sluggish inflation and boost its lackluster growth.

BII Report

A recent report put out by BlackRock Investment Institute (“BII”) indicated that most equity markets ‘have been running on empty in 2015,’and alongside increasing price-to-earnings ratio and dividends there have been flat or falling earnings. The report discusses the question of whether, with global financial conditions tightening slightly the markets can ‘stand on their own legs.’ One senior investment strategist with BII pointed out that if companies in the U.S. are to post high growth earnings, a return to aggressive economic policies is essential – especially for markets where valuations are high.