January 6, 2016: Back to the Future Edition, A random walk through recent economic, market and business headlines

“You can’t connect the dots looking forward; you can only connect them looking backwards.”  – Steve Jobs

‘Tis the season once again: Prediction Season. This is the time of year when gurus and sages crawl out from under rocks and bridges – and Ivy League economics schools – to publish their official Predictions for the New Year.

This year’s predictions are, well, predictable.

Marketwatch polled ten Wall Street analysts, and found that the consensus market opinion for 2016 is downright flat. The table below shows 2016 predictions for the S&P 500, compared to last year’s targets:

2016.01.05 Pic2_chartWe respect those analysts, but really guys? About the same as last year? 2016 is shaping up to be one of the most interesting and volatile stock market years in memory. Here are just a few of the reasons stocks could get a little crazy this year:
• The Presidential Election: Major economic policies hang in the balance. No matter who gets elected, change is coming. That’s not a bad thing; a lot of change happened between Truman and Obama, and the market – long term – held up pretty well through presidencies of both parties.

2016.01.05 pic3_chartGerald Ford had the best presidency for stocks

• The Federal Reserve: The Fed hopes to raise interest rates this year, maybe as much as 1%…maybe more. Surprisingly, the market tends to do well during the early stages of rising interest rates.

Rising rates may not hurt the market

• The Middle East: are we hurtling toward The Apocalypse? Sometimes it feels that way. The geo-political chaos in the Middle Eastern will almost certainly lead to volatility in the stock market in 2016. (Note: the end of the world would be negative for stocks.)

• China. One morning last August, China’s market caused a 1000 point drop in the Dow Industrial Average. As we write these words on the first trading day of 2016, another Chinese stock market selloff is driving our market is down 2%. Won’t be the last time the Chinese market influences our market – down and up – in 2016.

We are not forecasting doom and gloom for the stock market in 2016! All we are saying: the next twelve months should be interesting, exciting, scary at times, and probably not flat.

A few forecasters have made dramatic predictions for 2016. Consider these from Fortune Magazine’s editors:

Fortune Magazine’s predictions for 2016

• Apple will buy Tesla. Apple hopes to build an electronic car by 2019.With $200 billion in cash, Apple could easily absorb Tesla and reap:

1. Cutting edge electric auto technology.
2. The world’s best battery technology.
3. Tesla’s CEO Elon Musk who could become Apple’s genius visionary CEO-in-waiting.

• Marco Rubio will win the Republican nomination and choose South Carolina’s Nikki Haley as his running mate. (Some of our South Carolina readers are saying “wellallrightythen”.)

• Nuclear fusion will be successfully engineered by the private sector. Commercially viable fusion energy has been elusive, but several billionaires are working on it. If they are successful in 2016, energy will eventually be much cheaper to produce.

• A new Alzheimer’s Drug will show promise. Hope this prediction comes true. What a game-changer for American families and U.S. healthcare costs!

 Other 2016 “Game-Changers”

MarketWatch offers their own potential “game changers” for 2016. These include:

  • Marijuana may become legal in California, Florida, Massachusetts, Missouri, Nevada, Ohio and even more states, through initiatives on the November 2016 ballot.
  • Virtual-reality will become available to consumers this year. Expect the launch of Oculus Rift, a virtual-reality headset, in 2016. Decide for yourself whether there’s a connection between virtual-reality and the legalization of pot.
  • New smart technology will be about cars in 2016, and will change the way we drive. Remember Fortune’s prediction above about Apple and Tesla.
  • For the first time debt-free college will be a major issue in a presidential campaign. Both parties are talking about solutions to the student debt crisis.
  • Commercial drone use will be legalized. The FAA is expected to put out final regulations for commercial drone use in June of 2016. Today, businesses must apply for a Section 333 exemption to fly drones. Delivery is expected to be the first major application, with Amazon, Wal Mart and Google planning drone deliveries.
  • Star Wars mania will intensify. “Star Wars: The Force Awakens” was the fastest movie in history to reach $1 billion in sales. In 2016, “Star Wars: Rogue One” will be released, a spin-off of the Star Wars story.

In summary, 2016 will be exciting. The stock market is likely to be volatile; influenced by politics, international economics and geo-political tension.

Legal pot smokers will stay home, order a pizza delivered by drone and put on their virtual reality headphones.

The rest of us will ride in our Apple cars to the new Star Wars movie.

Watching the Tape is a compilation of news, observations and views written and edited by Bill Kibler, Senior VP, FinTrust Investment Advisors, bkibler@fintrustadvisors.com. Information is provided by sources believed to be reliable, but FinTrust is not responsible for accuracy. The information herein is not a recommendation to buy or sell any security. Past results are no indication of future performance.