In his recent Investment Advisory Newsletter, Steve Galligan had a few comments which I share here.
Commenting about 2015, he wrote, “The reasons for the lackluster performance include: the Federal Reserve decision to raise interest rates; a slowdown in China’s economy which impacts commodities; a global economic slowdown; a rising U.S. dollar that hurts U.S. exporters;, and a glut of oil that is partially due to U.S. fracking technology and Saudi Arabia’s decision to continue to pump record amounts of oil to retain market share. Thirty percent of high-yield bonds are tied to U.S. shale-oil producers who are under strain to make interest payments. Cheap energy is good for main street, but not so for bond holders or Wall Street. U.S. markets moved in unison with oil prices in December – consumer spending or sentiment did not matter. Santa got run over! “
He also added about December and the future, “The markets moved in unison with the price of oil, which fell in December – especially late in the month. We expect to wait to see if oil stabilizes in January, and if 4th quarter corporate earnings improve before we decide to change direction.”
While noting “Sector funds are less volatile than stocks but are more volatile than diversified mutual funds, “ the newsletter made a few basic recommendations:
No-Load Diversifed funds: Schwab Market Balanced (SWBGX) and Rydex S&P500 (RYSPX).
Industry Specific Sector Funds: Janus Forty Fund (JABAX); Rydex NASDAQ100 (RYOCX), and Rydex Health Care (RYHIX).