Five Reasons Why 2016 Sucked For Traders

It is often said that uncertainty may be the bane of the financial markets. As most traders have no doubt noticed, 2016 was full of uncertainty.

Below we look at five reasons why 2016 was a difficult year for traders. While the market appears to have bounced back in November, the outlook is about as clear as mud.

Brexit

Regardless of which side of the Brexit debate you’re on, the June 23 referendum was a terrible ordeal for traders. Ignoring the uncertainty that rippled through the markets leading up to the vote, the shocking aftermath led to the biggest selloff in global stocks ever. A staggering $3 trillion in paper losses were recorded in just two sessions after Britain decided to quit the European Union.^[1] That’s enough to leave a bad taste in your mouth for the rest of the year.

OPEC: Will They, Won’t They

If you thought the oil-price collapse was ending anytime soon, think again. The Organization of the Petroleum Exporting Countries (OPEC) has successfully talked up oil prices on several occasions this year by promising to consider lowering production. And nearly every time, the talks fizzled with nothing to show for them. OPEC’s colossal failure in boosting market confidence reflects its loss of power since the US shale oil boom got started back in 2005. OPEC may be poised to lower output beginning in January, but analysts note that won’t have much of an impact on long-term market stability. Traders may expect oil prices to remain lower for longer.

Donald Trump Election

Donald Trump shocked the world on November 8 by winning the US presidency. The immediate reaction was extremely positive, with US stocks soaring to fresh all-time highs. Global equities quickly followed suit, with Japan’s Nikkei reaching the highest level of the year. Apparently, investors are hopeful that Trump’s policies may boost economic growth and corporate profitability. While this may indeed occur, the impact of Trump’s policies might not   be felt anytime soon, a sign that recent valuations in US equities are overstretched. Additionally, Federal Reserve Chairwoman Janet Yellen has warned that the President-elect’s plan may stoke inflation and national debt.^[2] These factors may force the US central bank to raise interest rates at a faster pace than previously expected. As we’ve come to learn, the market  might be highly sensitive to rate-hike bets.