Dow at risk for down year

Aug 18, 2017 | by Franck Cushner, CFP®

Dow at risk for down year

After a promising start in 2015, the Dow Jones Industrial Average has taken a beating in recent months and runs the risk of having its first down year since 2008.  Market analysts say numerous events during the year affected the market’s performance, including the Federal Reserve’s recent decision to increase the lending rate for the first time since 2006.

Franck Cushner of Ensemble Financial says the Fed’s decision probably had its greatest effect before it was announced.  “The market hates uncertainty, whether it’s good uncertainty or bad uncertainty.  Everyone was expecting rate hikes back earlier in the year,” he explains.  “So once [the Fed] finally raised rates, I think it was pretty much a non-event.” 

Cushner says 2015 had a news-driven market. He said headlines that caused market jitters included international concerns involving the Middle East, Greece’s relationship with the rest of the Eurozone, and Russia’s invasion of Ukraine.  The collapse of oil prices has also been a factor.

Many Americans, Cushner notes, are concerned about the state of the Chinese economy, especially since China holds so much U.S. debt.  But he says that means it's in China's best interest for the U.S. to prosper.  “Because China is our banker,” he says, “they don’t want to see us fail, either.  They stand to lose a tremendous amount of money if they do anything untoward.”  

Cushner says 2015 was a record year for mergers and acquisitions.  As a result, he anticipates 2016 will be a year of spinoffs, as larger companies divest themselves of redundant divisions.  These new and smaller companies, Cushner says, could provide opportunities for investors, which could in turn lead to market growth.

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