It’s funny how history rarely repeats, but often it rhymes. Yet, in looking at the stock market performance for 2015, it seems oddly familiar. The first few months of the year have mostly been following the same pattern as 2014!
That’s quite interesting and rare, as we hardly ever see two years taking shape in similar ways. Yet, after the first 10 weeks, the market patterns are quite the same. No doubt, other factors have changed in 2015, such as the stronger dollar, no more QE, and sharply lower oil prices, not to mention a world of easy money and a very weak euro currency.
But what strikes me is the volatility and the expectation of sharp and jagged moves. Many of the experts told us as 2014 was coming to a close, we should expect some volatility this coming year, especially with the uncertainty over Fed Policy. We’ll get more clues where that may be headed next year, but suffice it to say, we are closer to a rate hike than ever before.
The uncertainty lies around how aggressive the Fed will be and how the market will react. When uncertainty is high, there tends to be a reach for protection, hence purchasing puts. When there is less doubt, we see volatility decline.
2014 had a poor finish (no Santa Claus rally) but still finished strong, up 13% for the SPX 500. It was not a straight line, but market moves rarely are. If 2015 follows the lead and posts a double digit gain, not many will complain about it!