Expect sell-offs in 2016

Throughout 2016, low oil prices will continue to weigh on economic growth and market performance, says Greg Greer, head of Global Debt Capital Markets at Scotiabank. He predicts oil prices will reach no more than $45 per barrel by the end of the year.

Greer was one of three speakers at the Empire Club’s 2016 outlook luncheon. He was joined by Ian Russell, president and CEO of the IIAC, and Nick Barisheff, founder of Bullion Management Group.

The outlook for 2016 is muted at best, the experts agreed. But one thing’s for sure: since the U.S. Federal Reserve has finally made its first move, markets will start to shift, says Barisheff. He expects increased volatility and stock sell-offs as we muddle through 2016, and he predicts markets will be affected by global political strife.

The main reason for sell-offs, he adds, is low interest rates have caused market bubbles over the last several years. Not only have stocks and bonds been impacted, but real estate markets have continued to heat up.

Greer points out that it’s an election year for the U.S., which will contribute to people’s uncertainty about how markets will perform. He cited data during his speech that showed there has been no consistent pattern for election-year Fed actions.

For more on the outlook for the industry and markets in 2016, see our live tweets below. And, follow @advisorca for more news and event coverage.

Live tweets from Empire Club’s 2016 outlook luncheon

At today’s @Empire_Club event, we’ll hear from Ian Russell of @IIACACCVM, Nick Barisheff of @BMGBullion and Greg Greer of @scotiabank

The @IIACACCVM late 2015 survey was influenced by oil prices and the federal election results, and by global weakness, says Russell. As such, only one in five respondents expect the economy to improve in 2016, with 28% predicting the economy will worsen @Empire_Club

Also, the survey says 12% of CEOs say a housing correction is likely. And, those surveyed were split on whether the BoC will raise rates this year: Russell (For more on housing, read: No housing correction in 2016)

Russell says the three trends expected to affect the financial/wealth management industry in 2016 are: demographics, regulatory change and structural tweaks to the industry.

Most financial industry CEOs say their operating costs have risen over the last four years. And, that trend is expected to continue: Russell. One reason for this is more firms plan to invest in technology (53%), as a way to simplify processes (23%) @Empire_Club

Overall, 2016 will likely be a weak growth year, with foreign private investment being the biggest market driver: Russell @IIACACCVM @Empire_Club

Now we’re hearing from Nick Barisheff: low interest rates have caused bubbles in stocks, bonds and real estate. But now we’ll see changes. For example, we’ll likely see volatile markets and stock sell-offs, says Barisheff. That will be due to economic contractions and political strife globally.

Gold has been in a cyclical correction for several years, says Barisheff. And now, the future for gold pricing will depend on China. That’s because China is making moves that are affecting the trading of gold, adds Barisheff. Currency moves are also impacting the gold market @Empire_Club

“The gold party is over for the moment,” says Barisheff. But, as a result, there may be opportunities to buy low and then sell high later @Empire_Club

To conclude the outlook discussion, we have Greg Greer. He’ll touch on the U.S. Fed, oil prices and capital market liquidity @Empire_Club @scotiabank

The Fed’s rate rise was expected, so there was a muted response to the news. But the market has been illiquid since then, and it matters that it’s an election year: Greer. In fact, historical data shows there has been no consistent pattern to election-year Fed actions. But Greer predicts the Fed’s fund rate will be at 1.5% by the end of 2016 (For more, read: Will the 2016 U.S. election hamper the Fed?)

Mining and oil exploration only contribute to 8% of Canada’s GDP, but the oil-price dip has still weighed on economy: Greer. In 2016, he expects the price of oil to reach no more than $45 per barrel @Empire_Club #energy #oil

Looking to bonds, Greer says the liquidity of U.S. government bonds won’t be affected much by U.S. Fed rate moves. But, there may be flight to quality with more people investing in U.S. Treasurys.