2016 Best and Worst Assets

Trader Scott’s Market Blog

January 2, 2017

The list of asset performance in US$ terms for 2016 can be seen here. These lists are always interesting for a couple of reasons, but there are also a few problems with them. It’s interesting to look at them (stocks and bonds) in US$ terms, and also in local currency terms. And for commodities priced in US Dollars, we can compare them in some foreign currencies. One problem is these lists are incomplete, of course you can’t list everything. For instance, in 2016 the HUI gold index would have been in second place on this list. The other problem with these lists is they measure from arbitrary dates – year end to year end – which often doesn’t mean the low or high for the year. Therefore these lists can be a bit misleading, but they are still helpful. The list shows the Brazil Bovespa Index as the best asset of 2016, while it was one of the worst in 2015 in Dollars, and worse in Reals. Notice how the top 9 best performers were either commodities or commodity producing countries. And this is with a 14 year high in the US$, while many commodities hung in very well this year. Which once again shows the attempt to do exact market correlations will fall flat on its’ face when a market is sold out, under accumulation, and it just needs a spark to turn. And the 1st half decline in the $ into May 4th took some pressure off of commodities. Even silver and gold continued rallying for two months after the May $ bottom. In this post from 1/6/16, I believed (and still do) early 2016 will be/was the secular bottom in commodities. This commodity index ETF shows the good year commodities had as a group, with energy strength helping alot. Soybeans had a good year, but agriculture overall lagged. And it was wheat, which for the second year in a row, helped to drag down agriculture. Wheat is a very large component of the agriculture indices, along with corn. There is tremendous potential in agriculture.

The interesting thing about these lists is to look for an asset which has been right near either the top or the bottom for at least two years in a row. In 2014 and 2015 crude oil was right at the bottom. Commodities in general were laggards for a couple of years, and this year they were leaders, with crude oil being noteworthy for its’ turnaround. We can use these lists to help do some planning. For instance, is it a good bet to believe wheat will once again be near the bottom of the list? And what about agriculture in general? Something near the top or bottom of the list for one year is not significant in itself. But for two or more, it’s worth considering. And also consider the pricing in US Dollars or the local currency. I’m bullish long term on Russian stocks and the Ruble. We can see the currency effect when looking at the US traded ETF compared to the Russian Micex Index itself. Either way, Russia has been right near the top for two years in a row, so caution is warranted.

In the bigger picture, the major low in the US$ was March of 2008, and the major low in US stocks was March 2009. Neither is about to crash. But the major low in commodities was earlier this year – the selloffs in commodities are the longer term buying opportunities. PMs are in a volatile process of retesting the major low from one year ago – the reactions are buying opportunities. But the most important, and also the biggest market in the world, is the global government bond market. It has very likely entered a massive bear market. This will have oversized effects on all other markets, as capital goes elsewhere. But shorter term, bonds are very oversold and quite despised. And lastly, just because something has been at the top of the list for a few years isn’t necessarily a reason to sell. Likewise, just because something has been sitting near the bottom of the list for a few years isn’t necessarily a reason to buy, but it’s certainly a place to start looking.

About

Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day.Scott returned to markets over fifteen years ago where he continues as an independent trader.