What’s Ahead for Stocks, Housing and Oil? Rookies and Pros Weigh In

Each January, Money Talks News peers into the future. Here’s what we heard this time around, from the amateur on Main Street and the professionals on Wall Street, about what to expect for 2016 in the key sectors of stocks, housing and oil.

(Also, just for fun, check out how well the experts and amateurs did when calling the shots at this time last year: “Wall Street versus Main Street: Who Got It Right in 2015?“)

The stock market

The amateur: Stocks will rise 5 percent, predicted our man on the street, speaking to Money Talks News founder Stacy Johnson.

The experts: Many analysts say stocks are overpriced, having tripled in value since 2009. They also point to international tensions, particularly in the Middle East, and to the slowing of China’s powerhouse economy, for the market’s subdued performance as 2015 came to a close.

Ten strategists surveyed by Barron’s in early December expressed caution and predicted moderate gains for the market in 2016. Although they forecast a 10 percent increase in the S&P 500 Index, that prediction is not as optimistic as it first appears, as the Barron’s article explains.

Based on their mean forecast, the Standard & Poor’s 500 index will end next year at 2220, an increase of 10% from [the Dec. 11] close of 2012. An advance of that magnitude is more reflective of the market’s rout last week, however, than undue exuberance among our prognosticators. To the contrary, the strategists were more cautious in their comments than in recent years past.

Heading into the new year, financial experts across the spectrum used words like “choppy,” “wobbly” and “volatile” to describe their expectations of the market. As if to prove it, the Dow fell 275 points when the markets opened on Jan. 4 for the first day of trading in 2016.

Stocks: The back story

In 2015 the stock market was essentially flat. The Dow Jones Industrial Average closed the year at 17,425 — a 2.2 percent loss. The S&P 500 Index closed at 2,058, for a 0.7 percent loss. It was the worst market since 2008.

Here’s what a really good year looked like for investors: In 2013, the Dow Jones index closed the year with a 26.5 percent gain. It was the biggest increase in 18 years. The S&P 500 index rose 29.6 percent, breaking a 16-year record. Don’t expect a repeat performance any time soon.

Oil prices

The amateur: Oil prices will average about $29 a barrel in 2016.

The experts:

  • Bloomberg News reports that Saudi Arabia appears to be basing its 2016 budget on $29 per barrel oil prices. That puts the expectations of the global oil-producing giant right in line with our amateur’s prediction.
  • The Energy Information Administration, however, expects oil prices to average about $51 per barrel in 2016.

Gas prices

There’s no hard-and-fast correlation between the price of oil and that of gas at the pump, but AAA spokesman Michael Green told us this rule of thumb: “Every $1 change in the cost of crude oil can move gas prices by about 2.4 cents per gallon.” The average cost of a gallon of regular gas on Jan. 4, 2016, was $1.99, according to AAA’s Daily Fuel Gauge Report. Also on Jan. 4, crude oil cost about $37 a barrel.

Today, gas is cheaper than at any time since March 25, 2009. The U.S. Energy Information Agency predicts gas prices will rise in 2016, but only a smidgen, from $2.04 a gallon in December 2015 to a monthly average of $2.36 a gallon in 2016.

Consumers aren’t getting the full benefit of the extraordinary drop in oil prices: When oil dropped 50 percent in 2015, pump prices fell just 28 percent. Experts list several reasons for that, including:

  • Oil refineries are holding onto more profits.
  • Gas prices rise and fall in part due to consumer demand.
  • It can take three to six months for crude oil to flow through refineries and into the gas pumps, delaying the effect of falling costs for consumers.

Oil: The back story

The world is awash in oil today. The glut pushed prices so low that industry analysts at Goldman Sachs wrote a paper about “The New Oil Order.” In other words, they think the change is likely to be permanent.

What’s behind the big drop in prices? Well, one word accounts for much of it: fracking. This newer technology, used to extract oil deposits from shale, has “resulted in substantially increased domestic production and a fundamental reorganization of the global energy hierarchy,” Goldman Sachs experts say.

Housing prices

The amateur: Our man-on-the-street predicts that home prices will rise: “Hopefully they’ll go up like 8 percent.”

The expert: Housing analysts agree that house prices will keep on rising, but 8 percent is an optimistic prediction. Home prices could rise 4 or 5 percent, predicts CoreLogic’s chief economist, Frank Nothaft.

The economy will continue to grow modestly, by 2 or 3 percent this year, says CoreLogic, which publishes data on housing and financial markets. Mortgage interest rates will creep slightly higher, perhaps to 4.5 percent for a 30-year-fixed rate home loan by the end of the year, Nothaft says. That, incidentally, still is an ultra-low price for a mortgage. He predicts that sales of homes and demand for rentals will remain strong.

Housing: The back story

The key word affecting the housing market today is “affordability.” Wages are rising, but only a little, and increasingly, Americans are being priced out of the market for buying a home.

Adding to the pressure, mortgage interest rates are likely to rise now that the Federal Reserve has stopped supporting low rates. Home prices grew 5.2 percent, overall, between October 2014 and October 2015, according to the latest S&P/CaseShiller Home Price Indices data.

One possible answer to affordability problems: Online real estate marketplace Zillow predicts that “a lack of affordable homes near city centers will push new and first-time homebuyers to (cheaper) suburbs that feel like walkable, amenity-rich mini-cities.”

Rents, which have grown rapidly in the last several years, still are increasing but perhaps a bit more slowly. In early November 2015, rents were rising 4.5 percent a year compared with November 2014, according to Zillow. That’s down from the 5.3-percent growth rate in the previous quarter.

What’s your outlook for 2016? Share your predictions in comments below or on Money Talks News’ Facebook page.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
11 Expenses That Quietly Drain Your Wallet
11 Expenses That Quietly Drain Your Wallet

It’s scandalously easy to overspend in these areas of your life.

20 Generic Brands That Amazon Created
20 Generic Brands That Amazon Created

Amazon’s growing collection of private brands offers everything from toilet paper and coffee to motor oil and clothing.

9 Purchases That Will Make You More Productive
9 Purchases That Will Make You More Productive

These Amazon products can give you an extra edge at work and other parts of your life.

10 Things You Should Never Buy on Amazon
10 Things You Should Never Buy on Amazon

Just because you can purchase something on Amazon doesn’t mean that you should.

Can My Wife Use My Social Security Benefits While Letting Hers Grow?
Can My Wife Use My Social Security Benefits While Letting Hers Grow?

Your self-discipline in not uttering three little words helps determine whether you can use a key claiming strategy.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
10 Things Frugal People Never Buy
10 Things Frugal People Never Buy

If you’re a true tightwad, the mere thought of spending money on these items gives you the willies.

10 Useless Purchases You Need to Stop Making
10 Useless Purchases You Need to Stop Making

You might as well flush your money down the loo if you spend it on these things.

7 Social Security Rules Everyone Should Know by Now
7 Social Security Rules Everyone Should Know by Now

Confusion over Social Security is a shame, considering how many of us will need this money badly.

9 Shopping Mistakes to Avoid at Costco
9 Shopping Mistakes to Avoid at Costco

Are you missing out on serious savings at your favorite warehouse club?

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

They don’t make coffee makers like this anymore.

The 16 Cars Most Likely to Last 200,000 Miles
The 16 Cars Most Likely to Last 200,000 Miles

One automaker takes half the spots on a list of the longest-lasting vehicles.

14 Things You Should Stop Buying in 2021
14 Things You Should Stop Buying in 2021

These convenient household products come with hidden costs that you might not have considered.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

Is Writing a Check Still Safe?
Is Writing a Check Still Safe?

Every time you pay by check, you hand your bank account numbers to a stranger.

6 Ways to Protect Your Retirement Accounts From Hackers
6 Ways to Protect Your Retirement Accounts From Hackers

Imagine having $245,000 stolen from your retirement account — and not being reimbursed.

8 Things You Should Replace to Improve Your Life Today
8 Things You Should Replace to Improve Your Life Today

Being frugal isn’t smart if you put off replacing these items.

This Is the Most Dependable Car Brand in the U.S.
This Is the Most Dependable Car Brand in the U.S.

This brand’s vehicles are least likely to give drivers repair headaches, according to J.D. Power.

7 Social Security Benefits You May Be Overlooking
7 Social Security Benefits You May Be Overlooking

There’s more to Social Security than retirement benefits.

13 Amazon Purchases We Are Loving Right Now
13 Amazon Purchases We Are Loving Right Now

These practical products make everyday life a little easier.

7 Hidden Sections of Amazon Every Shopper Should Know
7 Hidden Sections of Amazon Every Shopper Should Know

These little-known departments of Amazon are gold mines for deal-seekers and impulse shoppers alike.

7 Income Tax Breaks That Retirees Often Overlook
7 Income Tax Breaks That Retirees Often Overlook

Did you realize all these tax credits and deductions exist — or that they apply to retirees?

The 6 Best Investing Apps for Beginners
The 6 Best Investing Apps for Beginners

If you’re looking to ease into investing in the coronavirus economy with just a little money, check out these easy-to-use tools.

7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

Homeowners Say These 2 Kitchen Appliance Brands Are Best
Homeowners Say These 2 Kitchen Appliance Brands Are Best

One brand takes five of the top honors, while another ranks highest in three categories.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.