Market Forecasts Part 1

Over the weekend, Barron’s put out their annual quiz for readers to predict market related events in the coming year (you can find the quiz here, but a subscription may be required).

I thought it would be fun to share some of my answers – but keep in mind the quote from Warren Buffet, who said that ‘the only value of stock forecasters is to make fortune-tellers look good.’

I don’t have all of my answers below because regulations prevent me from talking about individual stocks on our Approved List (and there are a bunch) and I wanted to avoid the political stuff.

  1. What will the Dow Industrials return in 2016, including dividends?

I said somewhere between zero and 10 percent.  For the past few years, I’ve argued that stocks are expensive, which is likely to lead to below average returns in the coming years.  This year stocks are flat and I think a couple more years like this are in the cards.

  1. Which equity market will fare best in 2016 – the US, Emerging Markets, Europe, Japan?

The odds of getting this question right are only one in four, but my bet is on emerging markets.  The negative momentum there is pretty strong right now, but the valuations are attractive.  For me to be right, there has to be a big reversal from the negative trend.  This is surely not a slam-dunk.

  1. Name the top S&P 500 sector – healthcare, energy, technology, financials or consumer staples?

Like the last question, this is impossible.  The thinking behind my emerging markets pick leads me to pick energy, but it’s a real gamble.  All of the other choices would be a safer bet, but if I had to pick one, I would pick energy (thankfully, we never have to pick just one).

  1. What will be the year’s biggest financial surprise?

They offer a list and each one would be a big surprise, from yields falling below 10 percent to commodities prices surging more than 20 percent.  Consistent with my low return expectations, I went with the S&P 500 gaining more than 15 percent, which would be a big surprise.

  1. Which CEO will be gone by the end of 2016?

This one made be sad because it listed Warren Buffett as a choice.  At 85, he obviously won’t be around forever, but I hate thinking about the day when he won’t be one of America’s foremost businessmen and investors.  My bet is that Marissa Mayer at Yahoo will be out.

There are a few more questions and answers that I will provide tomorrow.