Like 2016, This May Be the Year Of The 'Unexpected'

Let the new year begin! After the low-volume trading that marked the last week of what became a volatile year, traders appear to be ready to rock and roll into 2017.

And why not? As we’ve noted many times in 2016, last year turned out to be the year of the unexpected. We didn’t exactly start it with ringing bells as the three major benchmarks all slid on a slippery slope before bottoming in double digits by mid February.

And just when we thought the markets were getting their groove back, that post-Brexit vote in June delivered another blow. We survived that and loafed through the dog days of summer and the presidential campaign before all three market metrics broke through records on what appeared to be a daily basis through the end of the year.

The question, however, now lies in what direction might the market move this year? After investors shook off Brexit, and a challenging and harsh presidential campaign and election to power equities and major benchmarks to untouched levels—ever—in the second half of last year, there seems to be a what-will-you-do-for-us-now sense surfacing.

After such a run, are the markets ready for more? Or has too much anticipation been built into the stocks prices, possibly portending a correction in the cards? Moreover, what did we learn in 2016?

Maybe more than ever, this year has underscored the importance of participating in the markets and sticking to your trading game plan. Even if we had wanted to predict what would happen in 2016—and what 2017 holds for us—it would have been for naught. You simply can’t predict what’s ahead.

And remember this: Though there may be stops and starts along the way, market participation is still a marathon, not a sprint. 

The Boys and Girls Are Back in Town

After last week’s thinly traded markets, this week appears to promise more with traders back at it and a slew of economic reports on the agenda. (See economic calendar below.) What may get the most attention is Friday’s job numbers, mostly because it will be the first look at the employment picture for the year.

We’re also likely to hear a lot of chatter about the upcoming earnings season that unofficially starts Jan. 9 when Alcoa Corporation AA begins the parade. There are a handful of heavily traded equities up in January, including the so-called FANG stocks that include Facebook Inc FB, Amazon.com, Inc. AMZN, Netflix, Inc. NFLX and the corporate giant formerly known as Google but is now Alphabet Inc GOOG.

How Many Interest Rate Hikes in ’17?

If the Federal Reserve holds true to its December statement that it foresees at least three more increases in interest rates by 25 basis points each, then that’s what we might expect to see. But remember, the Fed forecast that at exactly the same time last year and look what happened there.

Still, it’s likely that FedWatch will continue to be a past-time hobby for some investors this year. But it’s important to keep in mind that what the Fed divines in December may or may not happen. Like trading, past performance is no guarantee of future performance.

At this point, the CME Group Inc CME FedWatch tool doesn’t see a more than 50% probability of another interest-rate hike until June. What we do know is that since early November, the yield curve looks to be flattening as 10-year Treasuries rose by more than 50 basis points. Is there more of that ahead?

And A Look at Oil

Falling into the who-knew category for 2016 was the price of crude. In the beginning of last year, crude prices touched $26 a barrel on Jan. 13 and Feb. 11. Sure it bounced off those levels twice and both times crude finished those months in the mid-$30s. But on the long-time charts, $30 shows up as the bottom. But it tapped $26. Twice.

The lesson here: Sentiment was more bearish in the beginning of the year that many investors may have forgotten. Now oil prices appear to be solidly in the $50 range. Is that a bearish or bullish viewpoint today? Stay tune for how it plays out.