Three Trading Predictions For 2016

Attempting to anticipate what the markets may do in subsequent months and years is certainly no easy task.

We can, however, make some fairly tentative trading predictions for what may occur moving into 2016 based on what we have seen in recent months.

Let’s take a look at three major events that may come to fruition next year.

Q.1. UK Interest Rate Increase

It looked for a while as if the United Kingdom may enter a period of deflation.

Recent data suggests that the consumer price index is up by 0.1%, suggesting a small possibility that we may see a rate increase in the first quarter of next year.

IHS Global Insight economist Howard Archer had this to say: “We believe that it is currently touch and go as to whether the bank of England raises interest rates from 0.50 per cent to 0.75 per cent in the first quarter of 2016 or delays until the second quarter.Much will clearly depend on how economic growth, earnings and productivity develop over the coming months, as well as just how quickly inflation moves up over the coming months.”

Whatever is in store through the first quarter of 2015, we may see rates rising to 2% before or by the end of 2017.

Bad News for the US Housing Market

Low interest rates have secured growth in the US housing market, but one has to wonder just how reliant the market has become on the suppressed rates.

The S&P Case Shiller 20-city home-price index is reported as a value-weighted average of 20 different metropolitan area indices across the country. This average saw an increase of 4.6% over the last year, but whether or not this figure will hold steady when rates are inevitably raised again remains to be seen.

Short-term increased affordability has had a positive effect on the US housing market but if 30-year mortgage rates increased by 1% in the next year, this will increase monthly mortgage payments by a shocking 18% if accompanied by a 5% rise in the price of properties.