In the first four trading days of 2016, U.S. stock market indexes have declined approximately -5%, the worst four day start to a year for the Dow and S&P 500 in history, according to FactSet data going back to 1897.  The catalysts for the decline seem like an almost exact replay of last August’s correction – news of slowing economic growth in China, China devaluing their currency, and the Chinese government interfering with free operation of their stock market. Let’s look at each piece to discuss what is happening:

As this note is being written on the last day of the year, the Dow is down over 100 points, capping off a year of flat to negative returns for major stock indexes in 2015. Looking at how things stand in December, here are a few observations:

Yesterday the Federal Reserve increased the Fed Funds rate by 0.25%, effectively ending a 7 year period of zero interest rates. The move in rates was widely expected, but the main event was what Fed Chair Janet Yellen said about the future…

This week, three charts particularly caught the attention of The Joseph Group’s investment committee as we discussed what is happening with markets and what is likely to happen going forward.

This past week, all eyes were on Congress and the debt ceiling negotiations. A budget deal was struck, but there were a couple important provisions of that bill not being talked about which impact Social Security claiming options. Specifically, two key strategies were targeted which are now being phased out.

“If you were to close your eyes and not look at the market for the next five years, where do you think you could make the most money?” Our answer to the question:

First the bad news. The 3rd quarter of 2015 was the worst quarter for the financial markets in four years. From July through September, most major stock market indexes experienced a correction of 6% to 10%, with areas such as energy, health care, and emerging market stocks getting hit even harder. With markets generally flat in the first half of the year, the correction in the 3rd quarter means virtually every index we look at for asset classes around the world is down 6% to 10% on a year-to-date basis.What’s the good news?

Fears of China’s slowing economy and the resulting correction it caused in late August has clearly rattled investors. Understandably, investors are asking, “what’s next?” Read about some of the key things we are looking at:

Japan is known as the “Land of the Rising Sun,” but could it also be known as the Land of the Rising Stock Market? So far in 2015, foreign stocks have broadly outperformed U.S. stocks, but European companies seem to be attracting the most attention. Japanese stocks have risen alongside Europe, but seem to be flying under the radar.

Home, home on the range…the U.S. stock market seems very at home in the “trading range” it has been in for the last four months. One of the key questions we have been asking in The Joseph Group’s Investment Strategy meetings is “What could make the market break out of this sideways pattern to one direction or another?” In an attempt to answer this question, we’ve tried to look at possibilities in both directions.