financialsense.com / CLIF DROKE / 26 OCTOBER 2016
We’re about to enter that time when financial commentators offer up their best guesses as to what investors can expect in the Near Year. It always makes for fun reading, but it also never fails to disappoint. Instead of engaging in that tired exercise in futility, investors would do better to focus on something more productive. And that would be next year’s most likely catalyst for stock and commodity prices.
Instead of asking the fruitless question, “At what price will the S&P 500 finish in 2017?” wouldn’t it be better to ponder what could possibly stimulate asset prices out of their lethargy? Granted, this is as much a guessing game as the former question. But at least applying critical thinking to the catalyst question, investors are almost certain to uncover some hidden opportunities for profit.
Having said that, what could be next year’s biggest catalyst for a meaningful breakout-type move in the broad equities market, the commodities market, or individual issues within both categories? Putting the pieces of global events over the last year together and reading between the lines allows us to make at least one educated guess: military conflict. War is after all one of the biggest catalysts for both stock and commodity prices, and it has the added benefit of boosting the economy, short-term. Of course, war must be paid for down the line, but that’s why “kicking the can” was invented (so that the day of reckoning can be perpetually delayed).