Welcome to 2016

Chinese currency devaluation and a looming clash between the House of Saud and the Iranians greeted investors on the first morning of the new year. Foreign markets were smashed overnight as the Shanghai exchange executed its first ever circuit-breaker trading halt. Here in the US, the S&P 500 gapped lower after its abysmal closing sell-off from the final afternoon of December.

In both 2014 and 2015, the S&P 500 finished the month of January down around 3.5%. However, the two-year annualized return was in the neighborhood of 6% for these years, so a bad start didn’t turn out to mean anything particularly onerous.

Skeptics would say that the 2014 and 2015 opening vomitorium was mostly thanks to profit-taking as the outsized-gains in each of the previous years were harvested. No such thing this time, as gains were very hard to come by for most investors over the last 12 months.

This one feels more like it’s fear-driven than the other two.

Strap in.

 

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