What insights can we gain from our look back at 2016?

Every year brings its share of surprises. How many of us could have imagined that 2016 would see the Chicago Cubs win the World Series, Bob Dylan receive the Nobel Prize in Literature, Donald Trump elected president, the United Kingdom’s withdrawal from the European Union, and the Dow Jones Industrial Average close out the year just short of 20,000?

In 2016, the U.S. financial markets reached new highs, and stocks in a majority of developed and emerging market countries delivered positive returns. Yet, the year began with anxiety over China’s stock market and economy, falling oil prices, a potential U.S. recession, and the stock markets in France, Japan, and the U.K. registering losses of more than 20 percent from their previous peaks. U.S. equity markets were in steep decline and had the worst start of any year on record.

The markets began improving in mid-February through midyear; however, it was not always smooth sailing for the remainder of 2016. Investors faced uncertainty from the Brexit vote in June and the U.S. election in November. While both of these events created a significant amount of consternation, which played havoc with the global stock markets, the duration of the declines did not last long. Unfortunately, too many investors panicked and sold everything to cash.

“The reality is that no one has any idea what new and unforeseeable circumstances are in store for us in 2017 and beyond.”

Ultimately, many of these investors either stayed in cash or reentered the markets too late and missed out as the U.S. stock market had a strong year. The S&P 500 Index logged nearly a 12 percent return, and U.S. small cap stocks, as measured by the Russell 2000 Index, returned over 21 percent. As well as the U.S. markets performed last year, it was only the 17th best performing country out of 46 countries in the MSCI All Country World Index (ACWI). The S&P 500 index performance in 2016 was not even in the top half of the index’s historical annual returns.

So what insights can we gain from our look back at 2016? Hardly anyone predicted the Trump victory or the Brexit. The financial press of late is rife with some pundits foreseeing a higher stock market for the next year and beyond, while others are predicting a significant downturn later this year. The post-election rally is a speculative guessing game, as people are wagering on the effectiveness of the incoming administration’s economic policies before any have been implemented. The reality is that no one has any idea what new and unforeseeable circumstances are in store for us in 2017 and beyond, much less the direction or extent of the effects of those circumstances on the financial markets, and it would be foolish to base one’s long-term financial welfare on such pure conjecture.

So let us help you make sense of the media noise, sort through the clutter and weather the market’s uncertainties with peace of mind. That’s our recommendation for long-term investing success.