The stock market melted down at the end of 2015 erasing all gains for the year. Then 2016 started with losses as the Chinese stock market fell 7% on the first day of trading and losses followed in markets across the globe. When the news is bad there is a tendency for everyone to sell, even stocks that show promise for the coming year. Although there will continue to be issues that damage the market in the coming year our interest is in stocks that will buck the tide in 2016. Two sectors come to mind, big banks and oil stocks.
One sector that has gotten its house in order is banking. And these are the folks who will benefit as the Fed raises interest rates. CNBC discusses why you should big bank stocks now.
Big banks faced a rough end to 2015 followed by a significant sell-off on the first trading day of 2016, but one analyst says now is the time to buy these large-cap bank stocks.
Although Morgan Stanley tumbled more than 11 percent over the course of the last month and JPMorgan fell more than 6 percent, Barclays senior analyst Jason Goldberg thinks there’s a light at the end of the tunnel – and that is the Federal Reserve.
“Banks trade with the global economic environment, so clearly there’s been uncertainty as China’s been in the news obviously of late, and that tends to weigh on the stock,” Goldberg told CNBC’s “Squawk on the Street” on Tuesday. “If the Fed continues to raise rates, margins should expand in 2016 and 2017, and we think that will accelerate both revenue growth and earnings growth,”
If you believe that banks have gotten more efficient during tough times and now will make profits as rates go higher, then these are stocks that will buck the tide in 2016.
Stocks in this sector include Bank of America, HSBC USA, Capital South Bancorp, Wells Fargo and Citigroup.
The other sector, which profits during periods of turmoil, is oil.
Relations have seldom been friendly between Iran and Saudi Arabia and now they are getting worse. The issue is that these two countries have a fourth of the world’s proven oil reserves and if tensions worsen the price of oil is going up. CNN Money writes about how Saudi, Iran conflict could drive oil prices up substantially. Their take is that no one is the region would be stupid enough make things even worse. We think they are wrong.
The world is holding its breath as Saudi Arabia and Iran – the kingpins of OPEC – engage in a scary staring match.
In recent days, tensions have dramatically increased between the two countries. Together, Iran and Saudi Arabia hold one-quarter of the planet’s proven oil reserves and until a few years ago such a conflict would have sent oil prices skyrocketing.
You cannot afford to disrupt oil supply from this part of the world – for any period of time,” said Fidel Gheit, Oppenheimer’s senior oil and gas analyst.
So why aren’t oil traders worried silly about this confrontation?
Because few believe a shooting war between Saudi Arabia and Iran will actually start.
Our take is that wishful thinking will not make the sectarian violence in the Middle East go away and wishful thinking will not make headstrong rulers change their ways. Stocks that will buck the tide in 2016 will probably be oil stocks, especially in the USA.
Stocks to keep in mind include Chevron, Royal Dutch Shell, BP, Exxon, Conoco Phillips and Halliburton. As always do your own homework before investing.