A Look Back at 2016 Hits and Missies


  • Our stock market forecast, as described in our Outlook 2016 publication, was largely on target for the year, while we appropriately maintained our year-end stock market forecast during the February market lows.*
  • Political elections, both in the U.S. and the U.K. made for some of the biggest surprises of the year, and brought some unexpected market impact.
  • Other hits included our decision to largely stay on the sidelines with regard to international equity markets, while favoring large caps and growth were among our misses.

This week we take a look back at some of our hits and misses of 2016. We certainly had some of both in what was a difficult year to forecast the equity markets.

First, the year got off to one of the worst starts ever with a 10.5% stock market correction during the first five weeks of the year as oil prices collapsed. Then we got unexpected election outcomes. In the U.K., the Brexit vote and the stock market’s post-vote resilience were both largely unexpected. Similarly, few predicted Trump’s victory (which apparently surprised even the president-elect himself). That surprise was followed by another — one of the strongest post-election stock market rallies in history.

Against that unpredictable backdrop for stocks, we got some things right and some things wrong. Here is a look back at the hits and misses of 2016.

*As noted in our Outlook 2016, we expected mid-single-digit returns for the S&P 500 in 2016, consistent with historical mid-to-late economic cycle performance. We expected those gains to be derived from mid- to high-single-digit earnings growth over the second half of 2016, supported by steady U.S. economic growth and stability in oil prices and the U.S. dollar. We believed a slight increase in price-to-earnings ratios (PE) above 16.6 would be possible as market participants gain greater clarity on the U.S. election and the U.K.’s relationship with Europe.