It’s almost the end of the year.
That means you’re going to get plenty of predictions for the next year.
Most predictions will turn out completely wrong.
That’s respectable though. Thinking about where the puck is going instead of where it is now is a step in the right direction for most investors.
Many predictions will be nothing more than non-prediction predictions. We’ve covered them before. These will include warnings of “volatility ahead,” explanations of why now will be “a time to be defensive,” and, my personal favorite, next year “is going to be a stockpicker’s market.”
Each more worthless than the one which came before it.
Finally, there will be a few that turn out wildly prescient a year from now.
Below is your editor’s attempt to make it into the latter category.
My Big Prediction for 2016
My big prediction for 2016 is there will be no major changes in stocks at all.
That’s right, nothing will happen in 2016.
I’m not trying to be cute there. It’s actually a very important concept with underpinnings essential to understand.
You see, the trends which have brought us to this point in stocks are very strong. These trends will not change soon either.
Growth will continue to grow. The bright spots will get brighter. Sectors like cloud computing, healthcare technology, computer security, and the global data bottleneck will continue to do well.
Everything else, especially those that have lagged the market, will continue to lag. Many will do worse. Some will finally collapse too.
Here’s why and how to turn both the good and the bad here into an opportunity.
The problem starts with the world economy.
According to one very reliable indicator it’s bad and getting worse.
This indicator is the Baltic Dry Index (BDI).
The BDI is the index tracks the cost of shipping the fundamentals of global growth like iron ore, copper, corn, etc.
It goes up when demand for raw materials is high. It goes down when demand is low.
Right now it’s not just low, it’s at new all-time lows:
The chart sums up the world economy right there.
Boom, bubble, and bust.
Right now, the world is still in the bust part.
As the chart shows, the multiple rebounds of economic activity were just false starts.
Want to know why once oil prices broke down there was not bottom?
This is the chart which shows you why each “new floor” in prices didn’t hold up long.
All this, however, is not necessarily catastrophic news if you know what to do about it.
Trends and Turning Points
The fundamental factor pushing us to predict no major changes in 2016 is there are no apparent catalysts for major changes.
Do you see something that will change everything around?
Fed policy has been tweaked ever so slightly. The non-event we were predicting came and went.
Monetary and government policies have remained the same. No major changes coming there either.
Why would the results be different this time?
Correct. They won’t.
The only real potential changes are actually bad situations getting worse.
For example, Europe is overdue for another debt scare. China is fading fast. Oil prices are down and will not hold onto sizeable gains for a long time. Terror and potential wars are a variable that can only produce bad results too.
So our prediction isn’t an extreme one that will generate a lot of attention, but it does have a good chance of being right, important, and profitable.
After Christmas we’ll be getting back together and going over specifically what will happen with stocks next year, how some of the most consistently successful investors are getting prepared, and specific advice on what you can and should do about it now.
Enjoy the next few days. We’ll get back together over the weekend to go over all that and more.