5 Reasons Why 2016 Will Be Tough For The Economy

2016 is set to be anything but boring, from an investment perspective. With the first 2 months of the year already over, the key words the market revolves around seem to be uncertainty and volatility, with a smaller accent on “recovery”. This could mean great news for you if you’re an intraday trader looking for quick, big moves, but position traders won’t see the market heading into a clear direction anytime soon.

Here are the top 5 reasons 2016 will be a volatile year:

1. Global volatility across many investment vehicles

Including but not limited to: Currencies (U.S. Dollar, CAD, GBP, EUR, JPY – all at record numbers already), Crude oil prices, and emerging bonds, stock market overall performance, commodities, and many, many more. All these seem directionless at the moment with no clear trend in sight, meaning that we will see the whole up-down dance for a few more months, at least.

2. Non-performing loans aren’t over

One of the largest issues in recent times was that of default loans. This problem will continue to exist in 2016, and whether or not some will be written off is still just a matter of speculation. The industry sector is hit especially hard, since the majority of these loans come from there.

3. Main interest rates set to remain low

Central banks are not hurrying to raise rates, or even setting them back to positive territory. The EUR and JPY are the clearest examples, joining the CHF in below-zero interest rates in the start of 2016. The FED should be the main driver for interest rate growth, but they are also stalling at the moment.

4. Nominal growth has fallen

After a few great years after the last recessions, with stock markets at record levels, growth has begun to slow down, especially in countries like India and China, which were the main drivers for economic growth in the next period.

5. Geopolitical uncertainty

Lots of countries have presidential election this year, the most notable one being the U.S. There are talking points about another cold war, the Oil issue is due to lack of agreements between the largest OPEC members, and south-east Asia has some issues of its own. With so many things that could either go right or wrong, it’s very hard for the market to find direction and pace.

To sum up, be very cautious with the investment decisions you make in 2016. Before we see a clear trend, we recommend sticking to short-term trading or even not trading at all.

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