Stock investors enjoyed a nice ride on the bull during 2016. That didn’t look to be the case for much of the year, notable for its mini-corrections and nerve-wracking volatility. But the broader averages prospered in the end, with the Dow Jones Industrial Average in particular, with its basket of large cap stocks well positioned to be the beneficiaries of massive capital inflows in this Age of Liquidity, clocking in a VERY respectable 13% gain.
Airline stocks, dogs for much of 2016, wound up all over the place. Of the majors, United staged the most impressive recovery, rising 27% after management changes and an increasingly visible marketing campaign. Reliable, well-capitalized and never bankrupt Southwest also did very well at close to 16%, while American and Alaska have apparently calmed down investors’ fears regarding capital spending (AAL) and merger complications (ALK) .
The notoriously sensitive airline sector did well considering the turbulence of the political season and its focus on trade, industrial policy, terrorism and immigration, all of which have a big impact on travel. Yet it’s also remarkable how little attention was paid to two other variables, the rise in energy prices and the strange movements in interest rates. Oil prices are up sharply at 45% compared to the beginning of the year. Despite all the talk of raising rates, long-term treasury rates FELL during much of the year, and were as low as 2.3% in June. They essentially returned to the status quo by year-end. If one had a suspicious mind, one might surmise…smoke, mirrors and election year manipulation. But who has a suspicious mind? 🙂
Image: Hall of Mirrors, Versailles, by Myrabella