As 2015 comes to a close, large Wall Street banks release their market predictions for 2016 – the article below does a great job of summarizing these predictions. After reading these predictions year after year, one realizes that the predictions are often very close to each-other. In other words, none of these big banks wants to “rock the boat” by predicting a +20% year or a negative year. Often, up 5 %to 7% is the consensus.
What is interesting about this years predictions is that they are the most “bearish” in a very long time. Most banks are predicting a flat to slightly positive year in 2016. Should this give investors pause? Not necessarily. The US stock market could easily be up 20% this year as stocks continue to rally and the big banks scramble to reverse their bearish positions by buying equities. However, stocks could also have a negative year in 2016 – proving the big banks, and their research departments, wrong again.
My bet – bet against the consensus. I am looking for a big up year or a big down year in 2016. Betting against the big wall street banks is an easy trade – positioning your portfolio for “outside of consensus” outcomes is the difficult part.