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It's nearing the end of the year, which of course means it's time to start making predictions for next year. So here we go!
The market will go up 8-10% next year: That's a safe prediction. Anybody who is anybody on TV always says the market is going up about this amount next year. And then they show up on TV at the end of the year and say it again. I assume it's the long-term median. If I entered some sort of contest and wanted to win it for whatever reason, I would answer that I expect either a 10% decline or a 30% rally. And that answer would have no relationship to what I actually expect; I just want an outlier. What difference does it make if I miss by 30%? It's the same as missing by 3%, as far as winning a contest is concerned. On TV, though? It's probably best to go conservative. Someone might remind me that I missed by more than a tad.
Actually, who am I kidding, the best plan is to call for an implosion -- and then keep calling for it. Eventually, the market tanks and you can say you "called" it. So that's my call. Big declines!
Do I really believe that? Honestly, the best call is "the present trend will continue." Slow-paced rally! Maybe those calling for 8-10% upside actually have it right this time, at least as far as probability is concerned.
Volatility will pick up: We wrote about this a while back. No one ever says that volatility will go lower going forward. CBOE Volatility Index (VIX) futures never expect it. And, when they do, it's because VIX itself has actually flown higher. So unless VIX itself has already lifted, it's safe to say volatility will lift next year.
My real prediction is that VIX will see three or four blasts next year. In fact, that's my prediction every year. Real and lasting VIX turns don't happen all that often. A longer-term turn up is probably coming within the next couple of years, but you can go broke trying to time it. Check out that iPath S&P 500 VIX Short-Term Futures ETN (VXX) chart since January 2009.
Next year will be a stock picker's market: No one gets on TV and says "it doesn't really matter what stocks you buy, you're better off just indexing." They're paid to beat their benchmarks. If they don't, why am I paying those fees again? I certainly don't begrudge anyone talking their book. It's their livelihood. In some alternate universe, though, the host wouldn't ask the question to begin with.
The Giants will win the Super Bowl: It's not too early to say Odell Beckham Jr. is the best wide receiver in the NFL. He might be the second best ever after Jerry Rice. How tough is it to find 45 more great players to surround him with?
While we're at it, let's assume the Mets win the World Series and we all can party like it's 1986-87 again. Of course, last time the Giants and Mets were reigning title holders, the market crashed eight months later. So remind me to get my portfolio ready for the crash of 2016.
Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.