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Practical Economics

What's in Store for Investors, Savers in 2016

Look for more bumps ahead, but a bear market is unlikely.

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On October 20, 2015—10 weeks before the end of the year—nine members of our staff sat down to plan our investing outlook for 2016. Talk about sticking our necks out. But senior editor Anne Kates Smith, who wrote our main outlook story, thought it might actually be “less dangerous” to make a prediction for 2016 than it was for 2015. Her reasoning: We already experienced a stock market correction last summer, and the bull recovered nicely.

See Also: Best Stocks to Buy in 2016

Look for more bumps ahead, but a bear market in 2016 is unlikely. Besides, says Anne, predicting a bear market would be “a fool’s errand,” not least because it could scare off long-term investors who should stay in the market no matter what. Despite a nerve-racking lack of consensus on Wall Street, here’s our bottom line: Economic growth and a recovery in corporate earnings point to stock-price gains in the mid single digits, plus another couple of percentage points for dividends.

Of course, the 800-pound gorilla lurking behind any attempt to predict stock prices is the Federal Reserve, which has been sending on-again, off-again signals regarding higher interest rates. Our consensus is summed up succinctly by senior editor Jeff Kosnett, who writes our Income Investing column and is editor of Kiplinger’s Investing for Incomenewsletter. Opines Jeff: “Fed, schmed.”

If the Fed raises short-term rates incrementally throughout 2016 and into 2017, as expected, the increases are likely to be so modest that you’ll hardly notice. In fact, predicts Jeff, “low bond yields are an entrenched fact of life and will be around for the rest of this decade.”

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Since 2008, the U.S. Treasury has been able to sell more than $1 trillion in Treasury bills at an interest rate of precisely 0%—a boon for the government but a disaster for long-suffering savers. Assuming rates begin to inch up, “the pain (and gain) will be minimal for some time,” reports contributing editor Lisa Gerstner in her interest-rate outlook.

We’re not the only ones weary of Fed watching. Fixed-income specialist Marilyn Cohen, CEO of Envision Capital Management, concludes that individual investors “have to stop reading about what the Fed is or is not going to do and make conservative, well-analyzed investments.”

That’s where we come in. In her outlook story, Anne advises investors to stick with quality both here and abroad. Associate editor Daren Fonda lists eight stocks to buy and five to sell. In The Contrarian Investor, a new feature, Daren also makes the case for beaten-down master limited partnerships. In his column, Jeff recommends sectors that can supplement a core bond fund or ETF. And Lisa tells how to eke out the most from your savings.

Keeping a promise. As a follow-up to my October column on What Women Want, I promised that readers would see more stories on financial issues of particular interest to women. This month, three stories illustrate my point that although men and women use the same financial products and services, women often face different situations and have different priorities. For example, in our special report on pensions, women should pay close attention to how to build a lifetime income stream and choose a survivor option. We also clarify Congress’s recent changes to Social Security claiming strategies that affect married couples and spousal benefits. In Caring for the Caregiver, we offer advice and encouragement to readers—including a number of our Kiplinger colleagues—who are caring for elderly family members. Both men and women take on this role, but about 60% of caregivers are women, according to AARP.

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