Another consideration for the stock market in 2016 is the upcoming presidential election. Whenever we have a change in the oval office the stock market becomes volatile, which then becomes a catalyst for corrections. Capital markets do not like uncertainty and changing presidents is the ultimate uncertainty.
Unlike most economists, I believe that in 2016 a correction of 20% or more is probable. I think in the first quarter of 2016 we are going to see a correction of 10% or more. Oil, a change in the President and a world slowdown are all reasons for the market to sell off and there are very few reasons to see upside.
China remains my top concern and any negative information can cause a market sell off to correction levels of 10% or more. If nothing more, the possibility of a sell off is significant enough to avoid following the normal strategy most financial advisors recommend, which is to buy ETFs and mutual funds.
I repeat, fees on these investments can quickly consume any profit. But more importantly, these funds are likely to underperform and unlikely to even see any profit in the year ahead. What the advisors are saying is a safe investment is not safe at all; it is a high risk loser’s game!
Beware Of The Financial Advisor Selling His Own Goods
It is my opinion that the worst place to get financial advice is at your bank. I have spoken to many bank financial advisors and found very few are equipped with the skills necessary to really guide investors. For the most part they just sell mutual funds from a small group of offerings that are controlled by the bank. Basically these advisors are showing you less than 1/100,000 of what is available in the marketplace. .
Plus banks have very limited options on what products they can sell you. And they do call them products – only you don’t get any warranty or guarantee if it “breaks”. If you are looking for a place to get objective advice on investment options, it is prudent to look elsewhere.
Yes, I realize I sound a bit harsher than usual in this newsletter, but sometimes it seems that I have to hit people over the head with the truth before they get it! I will go to my grave telling you that financial advisors are motivated to make themselves rich, not to make you rich.
Okay. Here is some black and white truth.
In 2014 more than 90% of mutual funds underperformed the markets and this was even before fees were factored in. Even if you challenge what I’m telling you, you just have to look at the numbers. I guarantee that the numbers can speak for themselves.
I can also guarantee that this newsletter will not be popular with the financial services industry. And you know what? I don’t care. They are not my people.
I am not concerned about them. I am not concerned about how to line their pockets. My concern is about giving you a reality check, giving you some education, giving you some awareness of what the economy is doing. My concern is about giving you some common sense guidance about how to manage your money and where not to put it. At this time, that means the stock market.
I have no vested interest in writing this newsletter other than to guide members on the best strategies at any given time, as I see them. My priority is to help club members and I could care less about the hostility of financial advisors. They can dislike me all they want. They know the truth of what I’m saying. They just don’t want you to know it.