THE TOP 10 FINANCIAL EVENTS OF 2016

In the topsy-turvy world of finance, one factor is certain – uncertainty. We’ve seen that over the course of a highly eventful 12 months which has been marked by both historic highs and real lows for the markets.

We review ten of the most dramatic financial events of the year and analyse how successful traders were able to make the most of them.

10. The lifting of sanctions on Iran
For many years Iran struggled under the weight of international sanctions. In January the sanctions were lifted paving the way for crucial sectors of the Iranian economy such as oil and finance to re-enter the global economy.

The re-entrance of Iranian oil into the market resulted in a significant drop in oil prices. Traders who went short (took a sell position) profited. This high demand caused oil to oversell and pushed prices right back up, offering traders a new entry point to buy oil.

9. The stock market’s terrible start to the year
The start of the year was vicious. Within 10 trading days global equity markets lost over $4tn in value. Oil prices slumped with Brent crude reaching its lowest price of 2016 in January.

In February the Dow fell by 8.4%, the S&P by 8% and the tech heavy NASDAQ by 10.4%. After an initial rebound, the indices added to losses reaching lows for the whole year by mid- February.

Traders went into a selling frenzy. Gold provided a safe haven with soaring prices by mid-February, providing some good news for traders. For those investing in US indices, in particular tech stocks, the event cleaned up the field for overpriced small cap equities and marked an entry point for solid, fairly priced companies.

8. The S&P 500’s biggest quarterly reversal in more than 8 decades
Although the financial markets got off to a bad start they recovered by the end of the first quarter. Yet market earnings were nothing spectacular, with the S&P only gaining 0.8% in that quarter. However when the gains are viewed in terms of quarterly reversals– it was the biggest since 1993. This financial event provided a good opportunity to buy energy sector stocks in the S&P.

7. Gas prices hit 17 year low
Oil and gas fared poorly in 2016. Natural gas prices dropped to their lowest level in 17 years. Oversupply and warmer than expected weather in the U.S were blamed. Once again we saw that there is oversupply of gas with too much inventory.

 6. Japan’s negative interest rate bond
The Bank of Japan introduced negative interest rates in January, a financial event that took everyone by surprise. 10 year bonds were sold for the first time with a negative interest. Japanese investors sought higher yield Eurozone, UK and US debt. Meanwhile it was a great time buy Japanese manufacturing stocks such as Sony, Toyota and Samsung.

5. Brexit
The UK decision to withdraw from the European Union caught traders off-guard causing chaos in the financial markets. The GBP/USD pair dramatically slunk to more than a 30 year low and the pound suffered heavy losses against the AUD, NZD, JPY and CHF.

Traders who waited until the results were announced and acted fast had a great opportunity to sell pounds and make a neat profit. Gold provided a safety net for those invested in the pound.

4. 2016 U.S presidential electionTrump’s surprise November victory caused market volatility as the results came in.

The dollar slumped against the yen. Meanwhile shares in Asia, Australia and India dropped as traders moved their cash to gold and other ‘safe-haven’ investments. Markets quickly recovered from the post-result disarray and US indices began to climb with the Dow reaching an all-time high within days.

Trump’s election has created an opportunity for consumer equities, and indices continued to do well. The dollar too strengthened as a result of the interest rates raise announced in December.

Meanwhile, keep an eye on Trump’s Twitter account. Tweets disparaging Boeing and Lockheed Martin in December caused their shares to immediately drop.

3. India’s shocking currency recall
On the same day that the Americans went to the polls, India’s Prime Minister Narendra Modi announced the withdrawal of the 500 rupee and 1000 rupee notes to replace them with a new 500 and 2000 rupee note, sending the rupee crashing to a record low. The surprise announcement was deemed as a surgical strike against India’s underground economy which has been estimated to be valued at around 75% of India’s GDP and was a dramatic financial event for the people of India.

2. Opec agrees to cuts in production
OPEC confounded the market by agreeing to a cut in oil production first time in 8 years in November. The agreement came after nearly a decade of disagreement between the group’s 3 largest producers. The deal was designed to shore up oil prices as well as draining excess oil inventories on the world’s oil market.

Traders were able to take advantage of the agreement by buying oil and oil company stocks which gained up to 10%, as well as investing in oil exporting country currencies which also saw marked appreciation.

1. Non-Opec Countries Agree To Cut Oil Output
In addition to the Opec agreement to cut oil production, non Opec member countries also agreed to cut production – the first global pact in 15 years. Oil prices surged to nearly $57 per barrel, a 17 month high, after the deal was announced, marking an opportunity to invest in big oil corporations and oil rigs.

This article was written for marketing purposes and does not constitute investment advice. The information in the article represents the general views of our experts and does not take into consideration the personal circumstances, investment experience or financial situation of any reader.