FDP Quarterly Market Commentary

January 28, 2016

Market Review Q4 ’15

In some respects, 2015 was a year that unfolded as expected – predictability and surprises. e economy continued to plod ahead, the unemployment rate fell, and the Federal Reserve finally lifted the fed funds rate. But we also witnessed the tale of two economies: service industries expanded at a modest pace, but falling exports (U.S. Census) and huge cutbacks in the energy sector took a toll on manufacturers. Meanwhile, the relative outperformance of the U.S. economy versus its global partners kept upward pressure on the dollar. …READ ON

It’s the lifeblood of stocks and the biggest driver of the medium and long-term direction of equities. Using monthly data going back to 1923 (Robert Shiller, PhD, Yale.edu), there is a 96% correlation between S&P 500 earnings and the S&P 500 Index. That’s an extremely close correlation where 100% would mean the two variables move in lockstep. …READ ON

After plunging about 30% in 2014, U.S. oil prices fell nearly 40% in 2015 and have continued their downhill slide so far into 2016. Low commodity prices have benefitted nearly everyone outside of the energy industry, but woes in the commodity sector have hurt emerging market economies, and companies in the mining industry. e longer that oil prices stay this low, we will likely see more bad news from those companies and countries that rely heavily on oil sales. …READ ON

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