12/18/2016
A Year in Review: Events that Shook the Markets in 2016

A Year in Review: Events that Shook the Markets in 2016

Yes, you’ve probably heard it before: 2016 was a year of surprises. But these surprises weren’t just in the last several months, with an election win and a World Series comeback few could have predicted.

A Rough Start to 2016
At the start of 2016, global equity markets lost $4 trillion in value in just 10 days. With crude oil falling to its lowest level in over 12 years and the Chinese economy crashing 7% overnight, investors across the globe started 2016 in full-on panic. The Dow Jones Industrial Average registered its worst four-day start to a year in history. Also in January, Japan introduced a negative interest rate policy, leading to a huge drop in the Japanese Yen against other global currencies and the flight of huge sums of capital from Japan into U.S. and U.K. debt.

Precious Metals Rally
Gold Futures began a precipitous rise and reached two-year highs during the summer of 2016. But China’s depreciating currency, slowing economy and capital flight weren’t the only factors that shook the markets in 2016.

Brexit Brushoff
Briefly adding to the precious metals rally was a surprise on the political front, this time in Europe as the UK decided to leave the European Union after a referendum in June. Global markets plunged into uncertainty, then quickly recovered. Positive U.S. economic data sent the S&P 500 into the green just two weeks after the referendum when it began breaking a series of record highs.

The U.S. Presidential Election
Markets similarly brushed off the next political surprise of the year, when Donald Trump defeated Hillary Clinton in the U.S. Presidential Election. The shock upset caused a near unprecedented level of volatility, but the downturn lasted only several hours as investors warmed to the idea of fiscal stimulus for infrastructure improvements, lower taxes, and an easing of regulations. Suddenly, the epoch of ultra-low bond yields was called into question as total negative-yielding debt dropped below $11tn in December.
See also: “The Year in Markets: 2016 in Nine Charts” from the Wall Street Journal.

Oil Rebound & OPEC
In late November, OPEC finally reach a much talked-about deal to cap oil production and prop up the price of crude oil. A subsequent deal by non-OPEC oil producers to cut supply sent crude oil prices above $50 a barrel – roughly double the low set in the third week of January.

How to Prepare for the Next Surprise
The nature of a surprise is that it’s unexpected. Trying to prepare for them is an exercise in futility. When it comes to investments, the best way to prepare for the unexpected is to have a diverse, well-allocated portfolio with exposure to a wide variety of bonds and equities. And the best way to plan for the future is with the help of a qualified financial planner from OptiFour Integrated Wealth Management. Our integrated approach includes everything from strategic planning and implementation to regular portfolio monitoring. To learn more about how we can help you identify and achieve your life goals, please visit our homepage today.

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