Recap: Week Ending January 1, 2016

January 4, 2016

Equities ended the final trading week of 2015 in the red as the S&P 500 closed negative on the year, breaking a three-year win streak. Like in weeks prior, lightened trading volume was seen across markets as exchanges were closed early Thursday and all day Friday in celebration of New Years. Last week the S&P was the worst performing US index, closing the week down 0.83%. For the 2015 calendar year, the S&P closed lower by about 0.5%. On the flipside, the NASDAQ 100 Index was the best performing index in the US, closing down only 0.64% last week to settle Thursday at 4,593.27. Unlike the S&P, the NASDAQ 100 finished 2015 up just over 9%. Another major US equity index, the Dow Jones Industrial Average, which represents the 30 largest public companies in the US, had a year over year loss in 2015. Last year the Dow lost just over 2%. The economic calendar was relatively light last week with little releases of importance. As a result, much of the activity seen across equities was a result of closing up any remaining positions at year end. With this being said, weakness in the oil market has once again appeared to have spilled over into the equities space as oil closed lower once again last week. In recent times equities have looked at the volatility the price of oil as a risk and have subsequently developed a positive correlation with the energy product. Last week oil traded down $1.05 or 2.75% to settle the week at $37.07. The recent sell-side activity comes as no surprise to oil as it fell almost 30% in the 2016 calendar year. The story in oil last year remained the oversupply and lack of demand which pushed prices down dramatically. The weaknesses in oil last week, as well as last year, has without a doubt had negative implications on the Toronto Stock Exchange Composite Index or TSX. Last week the TSX fell 2.25%. For the 2016 calendar year, the TSX has lost almost 12%. The fall in the value of the TSX can be contributed to a weaker price of oil; however, a falling price of gold also did not provide any assistance. Gold finished the final trading week of 2016 down $15.30 or 1.42%. For the 2015 calendar year the price of what many consider a haven asset fell by roughly 11% as the Federal Reserve raised interest rates for the first time since the recession. The rise in interest rates has had a grave effect on the price of gold as a rise in rates is an attempt to control or slow down the rate of inflation. As gold has been historically considered a hedge against inflation, the need to purchase gold has fallen.

The world is entering a very dynamic stage where contradicting and multispeed central banking policy are taking effect. As a result, markets are expected to be turbulent in the 2016 year.

Happy Holidays and all the best in the New Year from the GTF Team!

DeGroote on Facebook DeGroote on Twitter WMA LinkedIn