Do you remember 1869? At the beginning of that year, San Francisco was still basking in the glow of a Gold Rush explosion that saw its population swell from 50 to more than 149,000 in just 26 years. Alas, before the year was out, the gold market collapsed on Sept. 24, which would go down in history as “black Friday.”
The events that day reinforced a timeless truth: Markets can change and gyrate faster than you can say, “There’s no more gold in them hills.”
Fast-forward to 2015 and other financial fantasy: If Wall Street offered investments in a company that made honest-to-goodness crystal balls, you can bet that pundits, prognosticators and everyday people would use the glassy globes to see into the future and make a fortune.
Even so, we can often tell where a market’s going by where it’s been. The new year is still one quarter away, but it’s never too early to make stock predictions. And if it’s also a sound projection, your portfolio will thank you later — whether for sheltering you from a hefty loss or paving the way to a big gain.
1. Energy Will Continue to Bleed Oil
On Sept. 18, the energy sector continued to report back the same bad news that has plagued it for all of 2015, recording its worst day in nearly three weeks.
Commodities futures for West Texas Intermediate crude oil — a market benchmark — have gone down, down, down, plummeting by about one-third in a three-month period.
Looking to the present, you’ll see some legacy stocks in energy have been unable to shake the blues –many also are down one-third over the past year. Such stocks include Suncor Energy (NYSE: SU) and British Petroleum (NYSE: BP).
Many experts predicted a rebound for oil, but the timetable has been moved back all year long. There is no evidence at this point that 2016 will result in a boisterous energy comeback.
Related: 7 Fastest Growing Stocks Since 2000
2. Cable Content Providers Will Get Tangled
Let’s see: You can get cable TV with its thousands of putrid channels and commercials and pay $100 or so a month. Or you can stream Netflix, get lots of deliciously curated content from feisty Korean soap operas to classic films, and pay less than $10 a month — without ads.
No wonder cable subscribers are cutting the cord and killing the companies in the cable content game. One example is Viacom (NASDAQ: VIAB), a company that recently saw its Class B stock sink more than 30 percent over the last three months.
“The big content originators will need to shift their business models to survive in this new era of TV viewing,” said Todd Antonelli, managing director of Berkeley Research Group in Chicago. “They should focus perhaps more on relevant, ready-now content for the needs of what’s becoming the norm in content aggregation: Netflix, Amazon, Apple TV.”
3. The Scary Bear Will Emerge From His Lair
It’s easy to look at Wall Street’s golden run of recent years and think it will go on forever. But here’s the rub: The American economy is no longer immune when the world’s big players sneeze.
Last month, panic over China’s economic woes sent the S&P 500 into what some have since characterized as another “flash crash.” And with Italy on the cusp of a crisis similar to the one that dogged Greece, along with continued uncertainties over China, it may be time to consider a selloff before Baby New Bear arrives in January.
“I see the Dow at 11,000 by the second half of next year,” said Ken Moraif, founder and senior advisor at Dallas-based Money Matters and author of upcoming book “Buy, Hold, and Sell!” “This would be the result of a bear market brought on by a global recession.”
4. Investors Will Like Facebook
Facebook (NASDAQ: FB) is an easy company to hate. When your page craps out on you, there is no help desk to call or email. And what about all those users pumping out posts like, “My month at that European villa was delightful!” and “My square-jawed, valedictorian son just got into Harvard and Yale. Tough choice.”
But invest now, and maybe you’ll have some cool wealth posts to brag about. Facebook was up more than 20 percent for the year in mid-September and is running hard to glean ad revenue and stay ahead of the digital curve in areas from product innovation to, of course, social media.
“Facebook reported strong results last quarter that emphasized the company’s scale, customer engagement, attractive growth profile and strong balance sheet,” says Ron Weiner, president and CEO of RDM Financial. “And for 2016, revenues are forecast to once again rise in the mid-30-percent range.”
5. Alibaba Will Emerge as Fine China
The $25 billion IPO of China’s biggest online commerce company made history in 2014 as the largest on record. But there’s more history to be made, Weiner says.
Right now, Alibaba (NYSE: BABA) is the largest online mobile and mobile ecommerce company in the world by gross market value, and boasts a light asset model complemented by healthy free cash flow.
While it’s more an investment to hold than strike it rich quick, Weiner still thinks Alibaba could be well worth it.
“With a forecast of a 20 percent-plus growth rate, the shares look attractive for patient investors,” he said.
Read: How to Buy Stocks Online
6. Many Stocks Will Emerge as Overpriced
When Warren Buffett plays his tune, people follow him like he’s the Pied Piper. That’s practically literal, as the Oracle of Omaha opened up a recent Berkshire Hathaway shareholders meeting playing the ukulele in a video.
And it was there that he expressed a somewhat jarring forecast for stocks in 2016.
“If we get back to normal interest rates, stocks at these prices will look high,” he told the gathering. Such a development is almost inevitable, he thinks, given that interest rates have stayed so low for so long.
And despite the Federal Reserve holding off yet again on a rate hike on Sept. 17, an eventual move upward is definitely in the cards.
7. Bonds Could be Browbeaten
Speaking of interest rates, some investments other than stocks have something to lose.
“Bond investors should be even more cautious,” said Robert R. Johnson, president and CEO of The American College of Financial Services in Bryn Mawr, Pa. “There is an inverse relationship between bond prices and interest rates: As rates rise, bond prices fall.”
Now who thinks rates will rise soon? Raise your hands. Ah, that’s everybody in the room.
“They can only move in one direction and that is up,” Johnson notes. “I believe that bond investors would be well-served to shorten the duration of their bonds — that is, move from longer-term to shorter-term bonds — in anticipation of rising rates.”
8. We Won’t Be Out of the Recession Woods (Yet)
While the National Bureau of Economic Research declared the Great Recession over in June 2009, it certainly hasn’t felt like it. And take note: Our neighbors to the north in Canada are now in a recession, Moraif said.
“The world’s economy is headed into recession and the U.S. economy is too weak to withstand that kind of downward pressure,” Moraif said.
9. Housing Stocks and Millennial Woes Won’t Mix
While the National Association of Realtors reported that existing-home sales for July hit an eight-year high, the recovery still feels tentative for some experts. That is in large part because for many millennials, buying a home remains a far-off goal, given that student loan debt for the class of 2015 passed the $35,000 mark, according to an analysis of federal government data by Mark Kantrowitz, the publisher of Edvisors.com.
John O’Donnell, chief knowledge officer of the Online Trading Academy, added: “Millennials will continue to rent and experience slow new home formations as they live in Mom’s basement and lick their wounds of large college loans and anemic job opportunities.”
10. And the Best Stock Market Prediction of All…
We can guarantee you this one will hold, as it’s proven true ever since the Crash of 1929, and even before. And that is the following: There will be no shortage of conflicting opinions.
It was not a Dow Jones analyst, but a Danish physicist — Niels Bohr — who said, “The opposite of one profound truth may very well be another profound truth.”
What hurts some stocks helps others. What wipes out one trader makes the day of another. And to this truism may we add a wise bit of caution: In 2016, the market will reward calculated risk takers and penalize the reckless.
What’s true in the casino is true on the Street: Bet with your head, not over it.