…[Investors] are looking for answers…[as to what will happen to the markets in 2017] but most aren’t even bothering to ask the right questions. I don’t know what’s going to happen [either] so here are 10 questions I’m pondering going into the new year:
Written by Ben Carlson (awealthofcommonsense.com)
1. Is President Trump going to set off some animal spirits or scare the markets with a tweet? Maybe a little bit of both? Neither? The thing is no one really knows what’s going to happen with our incoming president. All I know is anyone who thinks they know with any degree of certainty is nuts. It’s impossible to handicap these things.
2. Will value stocks continue their comeback over growth stocks? From 2009-2015, the Russell 3000 Value Index underperformed the Russell 3000 Growth Index by more than 65%. In that same period the Russell 2000 Value Index (small-cap stocks) underperformed the Russell 2000 Growth Index by almost 75%. This trend saw some mean reversion in 2016:
Will it continue? Are we finally seeing a comeback by value after a rough stretch?
3. Will emerging market stocks finally have their day in the sun over U.S. stocks? Since 2011, the S&P 500 is up over 100% while emerging market stocks are down more than 10%. These markets tend to be very cyclical in terms of their relative performance, but both markets finished with similar gains in 2016. Could we finally see emerging markets outperform after years of poor performance?
4. Will we ever see both stocks and bonds down in a calendar year at the same time again? Going back to 1928, stocks and bonds have only had negative calendar year returns in the same year three times — 1931, 1941 and 1969 (using the S&P 500 and 10 Year U.S. Treasuries as proxies). Is it possible we could see this play out in the coming years?
5. Will interest rates continue to rise or were the past 5 months or so an aberration? There’s been a huge shift in the direction pundits and investors seem to think rates go from here (up). Maybe everyone is right but this is a question that’s not so easy to answer.
