Limping into the New Year

Stocks are ending 2015 pretty much how they began it, limping and tired from a bruising year of headline risk, trendless economic data and an ambivalent investing public.

The recovery may be continuing, but nobody much believes in its sustainability as commodity prices collapse, wage stagnation continues and fears of robots and terrorists feature widely in the collective consciousness.

This is actually a good thing.

The slightly elevated volatility and lack of winning asset classes serves as a comforting rebuke to the bubble-callers. Earnings pretty much went nowhere for the S&P 500 – but neither did prices. Small caps and risky bonds fell. Averaging in this year’s flat return for stocks with the robust gains of 2013 and 2014 takes the 3-year and 5-year performance for the asset class more in-line with historical norms.

As of today, S&P gained an above-average 16% for the 3 year period and a perfectly average 10.4% for the 5 year period. In this context, the bull market has not “run on too far, too fast”; rather, its performance is well within what’s to be expected over the long-term.

But there isn’t any great news these days, other than the fact that the Fed got off zero and we didn’t have a crash. So we have that going for us, which is nice…

Short-term traders are watching the price of crude oil to detect tradeable bounce opportunities in the stock market (yes, they are temporarily correlated again) while long-term investors just shrug. A very small handful of macro players got the big picture right – long the dollar, short anything related to global growth or industrial activity. Most of the hotshots, however, did not and are licking their wounds.

But the page turns in a few days, even if the present conditions persist into the New Year.

Everybody loves a clean slate.