The financial markets entered 2016 in a tumultuous state. January 15th was an especially painful day that saw plummeting stocks and the fall of oil prices to below $30 per barrel. Additional concern has been raised by the Chinese stock market’s struggle. The Miller Group’s CEO, Rudy Miller, a frequent guest on Sequence Media Financial Network and Legal Broadcast Network, discusses the current situation and shares his thoughts about what he expects this year.
Miller notes that the U.S. stock markets have lost $1.6 trillion in value (as of January 15th), and worldwide losses are over $3 trillion. Miller states, “It was refreshing to get a 228-point positive bounce in the market [on Thursday].” He advises paying close attention to the first hour when markets open and the last hour and three-quarters prior to their closing.
The Dow Jones Industrial Average is on track to have its worst month since February 2009, and Miller points out that it is not possible to predict that the bottoming-out point has been reached. He expects more volatility and some bloody trading days in the near future. As always, investors should continue seeking sound financial moves. Miller suggests that there are companies with strong balance sheets, good equity-to-debt ratio, strong cash positions and solid projected cash flow for 2016. Furthermore, there are sound moves to be made in specific equities. For example, while biotech companies have taken a beating, airline companies are doing extremely well. Miller affirms, “They’ve got the biggest cash flow they’ve had in history.”
Looking at January 14th, Miller notes that oil was above the $30 mark, JP Morgan posted a very good earnings report, and China’s stock closed on the upside on the 13th. Additionally, St. Louis Federal Reserve President, James Bullard, took a softer position on rate increases. That same night, however, there was a sharp sell-off in Asia. Then the Dow and the NASDAQ opened down this morning. Oil has been driving the prices, and is now dipping below $30 per barrel. Soon, Iran will begin dumping oil on a slowing world economy. Miller points out that $15 Canadian oil is already available. He underscores the importance of maintaining oil prices near the $30 mark or better. Miller also explains that with an upcoming three-day weekend, a number of investors want liquidity rather than positions.
Miller mentions several financial institutions, in particular JP Morgan, as exemplifying what one would want to see in a bank’s performance. JP Morgan is also benefiting from the recent rate increase. As well, banks are cutting costs and increasing the use of technology, resulting in better bottom lines. The overall industry, Miller suggests, is in good shape compared to where it was during the 2008 market crash. However, banks that have a high percentage of energy loans in their portfolios will experience some challenges.
In considering the international picture, Miller predicts that China will continue to have a slower growth rate, perhaps in the 4-6% range. Political events, both at home and abroad, will cause stock market reactions. As to the energy field, Miller suggests that conditions will trend up over the next year or two. Smaller oil companies with balance sheet issues will most likely either end up as part of bigger companies or go bankrupt.
In summary, Miller does not anticipate a recession in the U.S. He expects job growth to continue to be steady. The overall U.S. economy will be solid and stronger than any other economy in the world. Miller does not expect the Fed to increase rates until May, and notes that Wall Street has projected four rate increases going into 2016. Miller offers the possibility that there will be three rate increases at a very measured rate until the economy approaches a 2% rate of inflation.
Rudy R. Miller is the Chairman, President, and Chief Executive Officer of The Miller Group as well as Miller Capital Corporation, an affiliated company The Miller Group, established in 1972. He was the Founder and Chairman of the Board of Miller Capital Markets, a FINRA member investment banking firm, from 2006 through 2012. He has over 35 years of executive-level experience owning, operating and advising corporations, from large NYSE listed public companies to emerging-growth private companies. His extensive operating and advisory experience provides clients with a comprehensive understanding into the challenges of successfully navigating a business through varying economic climates. The Sequence Media Financial Network is a featured network of Sequence Media Group.