The first half of 2015 was very calm for the stock market. This was attributed to sound fundamentals as well as investor optimism. As concerns began to build up, the happy attitude came to an end in the August-October mini-crash. This turnabout was responsible for the return of growth worries that led to investor skepticism as well as focus on risk. The market subsequently recovered from the August-October lows. This did not, however, boost investor confidence.
After VIX’s turn as an indicator of fear, it dissipated both in interest and amount. This all happened in the fourth quarter as the market reestablished itself. This was not enough to improve the attitudes of the investors. Their focus instead shifted to the price of oil. The price of oil hit a new low and the sense of uncertainty and risk rose. The situation was made worse by announcements by Goldman Sachs and others explaining why the price of oil could fall even further.
The stock market currently seems to be stuck in a rut and full of uncertainties. Investors feel that this will be the position of the market even in the new year. This notion is supported by analysts as well as other prognosticators who see little to bring excitement in the new year. This brings us to the reason that might see 2016 be a prosperous year. The stock market is currently in a very good position to see it produce positive surprises in the year 2016.
When stocks are considered weak, it is a good idea to invest by buying ‘safe’ stocks. These stocks are characterized by a conservative value and good returns in dividends. If the market produces positive returns, there will be a huge improvement in the attitudes of investors and the demand for successful growth companies will be on the rise.
James Dondero is a high-flying hedge fund manager who has managed billions of dollars in funds over his successful career. Jim is the CEO of Highland Capital Management. His experience spans over 30 years working in the credit and equity markets.
The original article by Forbes can be found here.