It's time to man up and take some lumps for last year's predictions column. There were a few that worked out, but overall, the results are a reminder of why I dread writing such columns and why I am grateful that my editors did not ask for a similar column for 2017. Perhaps they wisely didn't want any additional Heller macro prognostications.
Below are the original predictions, along updates.
- Volatility will reign supreme in 2016; it will be a wild ride. The S&P will rise or fall by 1% or more at least two trading days per week, on average. This will not be a repeat of 2008, though, and the S&P 500 will end the year up or down 10%. That's the best I can do.
Markets were volatile to start the year, but were surprisingly calm later in the year. During the past quarter, there have been just four days that the S&P rose or fell 1% or more. Year to date, the S&P has averaged one "volatile" trading day per week, just half of what I predicted. At this writing, the market is up more than 13%.
- The Fed will raise interest rates four times during the year; 25 basis point moves, and we'll end the year at 1.25%. They'd do more, but the economy will still be in slow recovery mode, and Yellen won't want to rock the boat too much.
Wrong again. Just one rate hike in 2016, which put the target rate at 0.5% to 0.75%. Way too early with this call.
- Earnings will start to matter for some of the dominant, high-flying momentum stocks. Names such as Amazon (AMZN) , trading at 123x 2016 consensus estimates, will be re-priced by the market. Great company, just an overpriced stock, says the simpleton value investor. Others that will also have a rough ride include the likes of Facebook (FB) , Salesforce.com (CRM) and Netflix (NFLX) .
The four names in question did not succumb to a repricing in 2016, although it was not a stellar year collectively, either. The average gain among the four year to date has been 7%, well below the S&P 500's return, with AMZN, FB and NFLX up 14%, 13% and 12%, respectively. CRM was down 11%. Still, AMZN trades at 86x next year's consensus estimates.
- Restaurant stocks will have a difficult year. Menu prices will rise, earnings will suffer and valuations will fall. We'll see some consolidation there, too; at least one bankruptcy, and perhaps a name or two will go private. The publicly traded restaurant space has grown too crowded with a plethora of IPOs in recent years, and the luster will continue to wear off of some of those names. Chipotle (CMG) , however, will recover at least as it pertains to its e-coli related issues.
The 60-plus publicly traded restaurant stocks that I track are up an average of 2.4% year to date, so it was a challenging year overall. Perhaps a better indicator of performance given the number of very small restaurant names from a market cap perspective are The Big Five, which includes McDonald's (MCD) , up 7%; Yum Brands (YUM) , up 25%; Chipotle, down 19%; Darden (DRI) , up 20%; and Domino's Pizza (DPZ) , up 47% -- they were up an average of 16%. Cosi (COSIQ) declared bankruptcy, but Chipotle had a rough year. Partial credit here.
- Precious metals will stage a small recovery during the year as investors seek solace from market volatility and continuing uncertainty around the world. Silver ends the year at $18, gold at $1,375. Apologies to the technicians for this one, I know the charts look terrible.
Gold is up about 7% year to date; while it hit the $1,365 level in July, it has pulled back ever since and currently stands at $1,140. Silver is up about 15% year to date, but after eclipsing $20 in July it has pulled back to about $16. While it was not a bad year for either metal, I was pretty far off the year-end mark.
- Donald Trump will not end up being the Republican nominee for president. Still believing it is his for the taking, he ultimately will realize how confining it would be to serve as president of the United States. Who would want that job, anyway? He bows out gracefully, although I'm not sure what that would look like.
Not much to say here. I could not have been more wrong.
- Marco Rubio and John Kasich (VP) defeat Hillary Clinton and Evan Bayh (VP) in November's presidential election. Many voters, disgusted by the process or lacking strong conviction for a candidate, stay home.
See #7. Although, I did get one thing correct, Hillary Clinton was indeed defeated, which means that I won a friendly wager with RealMoneyPro elder statesman Doug Kass (steak dinner, have not yet collected).
- The Philadelphia Phillies surprise everyone (even themselves) and clinch an NL wild card spot. A cobbled-together pitching staff rises to the occasion and makes Philly proud. Maikel Franco has a career year, the first of many.
The 2016 Phillies were surprising, all right -- for about one month, that is. We Phillies fans briefly basked in the glow of what could have been. They did improve over last year, won 71 games and finished fourth in the NL East, but were far from a wild card berth. Maikel Franco did not have a career year, batted just .255 but with a respectable 25 home runs and 88 RBIs.
The Affordable Care Act
9. More cracks appear in Barack Obama's signature presidential accomplishment. Rate increases accelerate further heading into 2017, making this year's 11% increase in premium (in my case) seem paltry. The subsidies received by many don't make the huge deductibles palatable, and more will opt to pay the fines associated with not having coverage.
This may have been the best (but most obvious) prediction of the bunch. Our renewal notice for 2017 showed a 38% increase for a similar plan. Many insurers, including Aetna (AET) , Humana (HUM) , and UnitedHealth Group (UNH) , pulled out of several states. This debacle is now on death's door, likely to be replaced under the new administration, hopefully by something that is better, with more thought behind it than the original mess.
Here's to a healthy and prosperous 2017!