It’s usually around this time of year that we start to look at the calendar, and ask ourselves where the year went. So we thought there would be no better time than now to reflect, and look at the big events that shaped the financial markets in 2015.
Stocks slipping up on Oil
What?
The price of oil has been in freefall. It’s hard to believe that in 2014 the price of oil was US$115 a barrel. Since then, the price has fallen nearly 70%, and is now at just over US$36.
Why?
In short, supply and demand: Too much oil being produced, and not enough people buying it.
Effect?
Sharp falls in some of the biggest Australian companies’ share prices. Santos is at just 25% of the price it was in late 2014.
A near Greek Tragedy
What?
It seems like an awfully long time ago – but over May, June, July of this year, Greece was on the verge of leaving the European Union.
Why?
Debt. The Greek economy is in a bit of a mess, and they owed people a lot of money.
In June they had a big debt repayment to make, and the only way they were going to be able to make it was by the rest of Europe helping them out.
But they wouldn’t help Greece out unless Greece agreed to some economic reforms. Greece were reluctant.
Effect?
Greece ended up agreeing to the reforms, they were bailed out, and managed to make their debt repayment.
The markets were very volatile around this time, but they soon stabilised and the whole incident was actually quickly forgotten about.
Trouble in the Far East, sending markets south
What?
The market had been worrying about a slowdown in Chinese growth for a while, and in July and August these fears came to a head.
Why?
China has experienced spectacular growth in recent history, and the data indicated a big slowdown.
Effect?
The Chinese stock market fell spectacularly in one day, China’s Black Monday, as it was dubbed. But before that, it had already fallen 15% in July. It is important to note that the Chinese stock market had grown by ~150% in the year before “Black Monday”.
Global stocks fell with China – but now there is widespread agreement that China’s growth is stabilising and not slowing down even faster.
Rising interest in Fed Rates
What?
The event everyone had been waiting for all year has come right at the end of 2015, with the Fed finally raising rates for the first time in 9 years.
Why?
After the GFC, rates have been at rock bottom to support the US economy and help it grow. With strong data coming from the US and signs that the economy is on a good path to recovery, the Federal Reserve have begun to raise rates.
Effect?
The symptoms (strong US economy), and anticipation of a rate rise has seen a very strong US dollar in 2015. We also saw a very weak Australian dollar with the RBA cutting Australian rates. If you went on holiday then this is probably a gloomy reminder, as it has basically meant you haven’t been able buy as much foreign currency for your Australian dollars.
What’s in store for 2016
Well the biggest news around the world in 2016 will surely be February’s launch of Raiz Australia…
But other than that there is a lot of room for the Australian and International stock market to go up, especially after a disappointing 2016. But stock markets have risk and it is never a certainty. Let us know your predictions for 2016 on our Twitter and Facebook pages.