It’s been a wild 2016 for the U.S. stock market. Panic-selling began
during the first six weeks of the year, followed by a powerful rebound
that quickly reversed double-digit losses in large- and small-cap
indices. Now the Standard & Poor’s 500 is within sniffing distance of
the all-time high attained last May.
Heading into 2016, some investors expected 2015’s challenging conditions
— a lackluster economy, weakening earnings growth and the prospect of
more interest rate hikes — to continue depressing the U.S. stock market.
Others predicted that stocks would bounce back because of rising wages
and a lack of alternative assets with attractive return potential.
In the middle of February, with the Standard & Poor’s 500 index down 10%
since New Year’s, anyone suggesting that the first quarter would end in
positive territory would have been laughed out of the room. And yet
that’s exactly what happened.
The market never believed that the Federal Reserve would raise interest
rates four times in 2016, so it came as little surprise last week when
Fed Chair Janet Yellen and her policymaking colleagues backed away from
such an aggressive path.