2015 Review

By Kevin Chambers

2015 proved to be an interesting year in financial markets. Major events around the world contributed to a tumultuous year, and it was reflected in the often erratic stock market. The United States was the bright star of the global economy this year: The job market strengthened, the Federal Reserve finally felt comfortable enough to increase interest rates, many US companies posted healthy earnings, and the price of the dollar was very strong.

Internationally, however, there were many concerns. China’s financial policy caused market volatility this summer. Their GDP growth slowed to below 7% for the first time since 1990 as their economy continued to transition to increased dependency on consumer spending. The Chinese government meddled in the stock market in an attempt to artificially stop a correction. The government also began the process of removing the yuan’s peg to the dollar, which caused more instability. Many global markets sold off in the summer on negative news out of China.

Oil prices stayed low all year, dropping to a decade low. Although the price stayed reasonably stable, the sustained low prices caused many problems for oil producing countries. Emerging markets like Venezuela, Brazil, Russia, and Saudi Arabia, were the most impacted by the constant low prices. Oil production companies also struggled as over supply is the main reason for the drop in prices. Going forward, most analysts don’t expect a significant rise in prices in the near future.

Europe also struggled in 2015, trying to claw their way out of recession. The worst offenders through the Euro crisis continued to cause the majority of the problems. Difficulty settling on a deal to help Greece dominated the headlines. For the better off European countries, interest rates continued to fall, even going negative in many cases. Growth in almost all countries stay muted. The Syrian migrant crisis and international fears surrounding the rise of ISIS will continue to be threats for global markets. As we progress into 2016, news will likely be dominated by the upcoming British referendum on their involvement in the European Union.

While some uncertainty remains looking forward to 2016, positive trends do exist. The US economy continues to look stronger than the rest of the world, and, as interest rates rise, it will be easier for savers to generate income with their money.  Check back next week when we will discuss the interest rate increase.