While 2016 stock market crash predictions are everywhere right now you need to realise, that there are simple strategies that can make your 2016 stock market predictions. Fund managers’ biggest over and underweight positions relative to their history reflect the unloved nature of these sectors. Ned Davis Research showed that the stock market has historically reacted much better to a slow pace of rate increases than a fast pace. The market will undoubtedly shift its focus to the evolution of the dot plots to see how quickly the Fed is likely to raise rates. Both my inner investor and inner trader are bullishly positioned, with exposure to the market and in the commodity sensitive sectors of the market. Large caps dramatically outperformed small caps during the Tech Bubble of the late 1990s and underperformed in the bear market afterwards – which were false signals.
As a result, stock begin to rise, led by interest sensitive sectors, such as Financial and housing related stocks. Mid cycle: Some analysts split this part of the cycle into several pieces, but here is roughly how market expectations change. During this part of the market cycle, Consumer Discretionary, capital equipment sensitive sectors like Technology and Industrial stocks lead the market higher. Bear phase: The stock market falls because of the expectations of higher interest rates and falling growth.
Examples include record levels of Mergers and Acquisitions ; wounded and dying unicorns and the growing sense of panic in Silicon Valley (via Luke Kawa ), as exemplified by Fidelity`s 25% writedown of its Snapchat stake ; and the frothiness seen in the art market. Mentally I’m feeling OK. It was good to see the market come back this week despite the turmoil around the world.
Synthetic credit is trading tighter than cash credit, which is also a sign that the market is paying for liquidity in the form of tighter spreads. Market moves that aren’t supposed to happen keep happening, which can be caused by illiquid markets failing to clear at critical periods. A good analogy might be riding around in a motorcycle at high speeds without a helmet on. Nothing will happen to you unless your crash. At 570bp ex-energy spreads, the market is well ahead of what would normally be considered sufficient compensation for defaults that are still tracking sub-2% in this segment of our markets.
With the recent back-up in both IG investment grade and HY high-yield spreads to their respective 3.5-year wides, a discussion has emerged about whether the market is sensing the next default cycle around the corner or is simply overreacting” to some exogenous but ultimately irrelevant events. History shows that rising spreads have been a precursor to economic recessions, which are bull market killers.