2016 may be the year of living dangerously, at least as far as investors are concerned.
As we close out 2015, a host of potential negatives are making themselves known. And while the stock market often climbs "a wall of worry," that adage refers to an environment in which the worries are phantom issues, not serious threats.
Take for instance the market maxims, "Don't fight the Fed" and "Don't fight the tape." Those are not insignificant concerns at this juncture in the recover and bull market. Ignoring these tried and true warnings is done so only at one's peril.
If we assume that economists are correct (though they often aren't) and the Federal Reserve raises rates four times next year, in addition to an unexpected rate hike this week, monetary policy will be less friendly for stocks than at any time since 2007.
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The implications have already begun to play out in the financial markets, whether through a mini-crash in high-yield debt, or in the subsequent failure of a prominent high-yield mutual fund.
Or, in emerging market debt, equity and currency markets, where a strengthening dollar is wreaking havoc … money is fleeing those vulnerable sectors and looking for safer shores on which to land, primarily in the U.S.
Global manufacturing is in recession, including here in the U.S., where that strengthening U.S. dollar has made our exports more expensive overseas and multi-national profits less plentiful than anytime since the recovery began in mid-2009.
Additionally, the market's technical condition has deteriorated significantly. The Advance/Decline Line, which measures the number of stocks going up versus the number of stocks going down on a daily basis, has turned negative, even as stocks rebounded in recent weeks. Market technicians call that a "negative divergence," which augurs poorly for the stock market's on-going performance.