Q4 2016 – An Interesting Year
The Q4 2016 of the year is here with us in what has been an interesting year so far. As the year started, I made a projection of what the new year would look like. A lot has happened since then. For instance, I predicted that the oil market would be erratic. I also predicted that the Fed would continue to watch out the market before the next hike. However, it was impossible to predict some of the biggest news that has happened so far. For instance, no one predicted that Wells Fargo and Deutsche Bank would be in the position they are today. In this article, I will highlight a few things to expect in the final quarter of the year.
#1 – General Election
Another fact of Q4 2016, are the general election in the United States that will happen in November 8. This will be the biggest story this month. The US is the most influential country in the world. It controls the entire financial market because of its sheer size. Therefore, when it holds its general election, it is always a big deal. The policies of the candidates are a big news to the financial world. The two candidates this year, Hillary Clinton and Donald Trump have different views on the world right now. While Hillary sees a world that is doing great, Trump sees the world in a troubling perspective. Hillary will increase taxes while Trump will lower taxes and end regulations. Financial analysts see the candidates differently. Therefore, as a trader, you need to keep in mind the happenings in the United States close to you.
#2 – Interest rates
So, this year, analysts estimated that the fed would hike interest rates four times. It has not raised the rates once. The last it did was in December last year when it did by 25 basis points. Interestingly, the issue has also become a political issue. Trump brought the issue during the debate. There has also been a lot of discomfort among the Federal Open Market Commission (FOMC) which sets the rates with a number of policy makers suggesting a hike. I expect the commission to hike in their upcoming meeting.
#3 – Banking Sector
The banking sector has started the sector in a complex situation. Deutsche bank ended the previous quarter in a bad way and started the Q4 2016 in the same way. The US regulators are demanding that the bank pays $15 billion. The bank has a market capitalization of a similar amount. At the same time, Wells Fargo, one of the biggest banks in the United States has found itself in a complex situation where it has created millions fake accounts. Commerzbank of Germany recently declared that it would fire more than 5000 people. In this quarter, I expect a lot of scrutiny to be on the banking sector.
#4 – October Surprise?
This being an election year, we still expect a number of surprises before the election date. The October surprise is an event that radically changes the direction of the election. Historically, in October before the election, something happens. In 2012, the October Surprise was a secret audio of Mitt Romney saying 47% of Obama’s supporters do not pay federal taxes. In 2008, the sudden increase in unemployment numbers were thought of as being the October Surprise. The list goes from as far as 1964.
#5 – Crude Oil
Crude oil is another unending news item that will not move away any time soon in this Q4 2016. Recently, the Organization of Petroleum Exporting Countries (OPEC) in Algeria agreed to cut production cuts. This production cut was a result of Saudi Arabia’s proposal to finally impose a cut. However, critics were fast to note that Saudi Arabia would not be affected because the cut came at a time when Saudi Arabia’s oil producing companies go for maintenance. There is also a case of the distrust among the OPEC members. Therefore, this quarter I expect some volatility in the oil sector.