As we near the end of the year, let’s take a look back at how we did in 2015. As always, it was an interesting year in the markets. And although we are ending the year pretty flat for the US stock markets, we did not escape without volatility.

As of 12/24/2015, the S&P 500 stood at 2,060.99 up 2.09 points for the year*. However, during the year, it ranged from 1,867.61 to 2,130.82. The Dow Jones fared about the same closing at 17,549.98 down slightly from where it began the year at 17,823.07*. So flat were the markets, that as of this writing (12/28), we still don’t know if these indices will close up or down for the year. Internationally, the developed markets as measured by the MSCI EAFE index are down 3.11% year to date. Breaking the trend are the emerging markets. As of the close on Christmas Eve, the MSCI EM index (emerging markets) is down 15.90% for the year. And it is these emerging markets that have put our markets on alert.

This year was dominated by three main drivers: China, oil and the Fed. Coming into the year, the Chinese market was on a tear. With the encouragement of the central government, the Shanghai A share index ran from 2,132 at the end of June 2014 to 5,410 by June of 2015. It then dropped 40% over the next four months to land at 3,197 in early October. But more concerning than the Chinese stock market was the Chinese economy, and in turn, many emerging market countries. With information hard to get (or trust), it seemed like the Chinese economy was starting to slow. And, as a very manufacturing based economy, this meant that it was consuming less raw materials. Many of these raw materials come from the emerging market countries, which is why we saw such a drastic pull back in their stocks.

Apparently confirming the slowdown in the emerging markets, the price of oil dropped from $107 per barrel in July of 2014 to begin 2015 at $52. As the year went on, oil continued its fall and closed on December 24th at $38.10 per barrel. The cause of this drop in price was twofold: too much supply and diminishing demand. As the US continues to pump record amounts out of the ground, OPEC and the other producers world-wide are doing the same. There is definitely not enough demand to accommodate all this production, so oil just keeps getting cheaper. And, while this has been nice at the gas pump, it’s a very large concern in the global economy. Oil consumption is directly related to manufacturing. So, a drop in oil consumption may be an indication of a slowdown in manufacturing which may be the result of less economic activity world-wide. This we do not need.

Finally, the Fed. As we entered 2015, it was widely believed that the Federal Reserve would begin to normalize interest rates by raising the fed funds rate this year. The consensus was that this would happen at the June FOMC meeting. However, as we approached that date, the economic data were too weak, so the Fed held off. Repeating the process for the September meeting, the Fed finally increased the fed funds rate by 0.25% at the December meeting. Now, this single rate increase did not do much for the overall interest rate picture. The ten year Treasury, which opened the year at 2.12% closed on Christmas Eve at a 2.25%. And, the future is still not clear. The Fed is going to be data dependent and will move rates based on the current economic reports. This means we don’t know when the next rate hike will be.

So, what can we expect for 2016? Probably more of the same. Although our economy seems to be trudging along, slow downs in Europe and China may keep a lid on our markets. Lower demand from these areas as well as a continued strong Dollar will likely inhibit the exports of our multi-national corporations and adversely affect their earnings. I expect the stock market growth to be in the low single digits. Interest rates will probably remain low. Even if the Fed raises the fed funds rate, longer term rates will likely be determined by the market. And as long as rates are low around the world (German 10 year = 0.56%, Japan 10 year = 0.27%), our rates probably cannot go that high.

That being said, the best way to achieve growth in your assets is by investing for the long term. While you might experience volatility day by day or month by month, if you stay invested for the long term, you have the best chance to come out ahead. As we head into a new year, it’s a good time to make sure your portfolio is still appropriate for your situation. Perhaps there have been changes in your life that need to be addressed. Or, if you haven’t checked for a wile, your portfolio may need to be rebalanced. If your investments are at Verity, please feel free to contact us at 206-361-5312 to set up a review. And, if they are held somewhere else, we’d be happy to give you a second opinion on your portfolio.


*Including dividends the S&P 500 and Dow Jones industrials total returns year to date are 2.20% and 0.90%, respectively. Non-deposit investment products and services are offered through CUSO Financial

Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Verity Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.


Gavin Chinn, CUSO Financial Services Advisor at Verity

Check the background of this investment professional on FINRA’s BrokerCheck.

A Financial Advisor registered through CUSO Financial Services, L.P., Gavin has 25 years of experience as an advisor in the Puget Sound area.

“I believe every client is unique and deserving of a personalized financial plan that will help them reach their individual financial goals. Before I make any recommendations, I like to get to know my clients. By asking the right questions, and developing an honest, trusting relationship, I can really get a sense of what’s going to work best for them.”

Gavin graduated from the University of Washington with a BA in Business Administration and started his financial career with US Bank in the Investment Department. Prior to joining Verity in 2006, he spent eight years with Piper Jaffray.

So what is Gavin’s vision for his dream retirement?

“My dream retirement would be absolutely worry free: financially, emotionally, and in every aspect of life. My finances would be in order so expenses for travel, luxuries, and gifts for the kids, grandkids, and great-grandkids would be taken care of. My kids would be financially sound, so I would be confident in their prosperity. This would give me the freedom to travel and play and do whatever it is I want to do.”

When Gavin’s not working, he enjoys spending time with friends and family, watching Husky football and taking weekend trips around the Northwest.

Gavin is registered to transact securities business in the states of AZ, CA, CO, FL, HI, ID, IL, KS, MN, NV, NY, OR, UT, VA and WA.

*Non-deposit investment products and services are offered through CUSO Financial Services, LP (“CUSO Financial”) (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CUSO Financial. Verity Credit Union has contracted with CUSO Financial to make non-deposit investment products and services available to credit union members. Atria Wealth Solutions, Inc. (“Atria”) is not a broker-dealer or Registered Investment Advisor and does not provide advice. CUSO Financial is a subsidiary of Atria.

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