US Stocks ended a disappointing year with losses, as 2015 was the worst year for the Dow and the S&P 500 since 2008.  Having had increases each of the past 6 years it’s easy to forget that the capital markets do not always go up.  The bear market in energy, slower global growth and the strong dollar’s effect on exports all contributed to the market’s malaise.  Despite these issues, the US remains the best developed economy (least dirty shirt) seeing good jobs growth for the year.  Automobile sales were very strong and while housing continues to improve, the rate of home construction still lags the rate of household formation and remains below the long term average.  Overall, consumer spending is growing slowly but showed signs of improving at year end.

Looking forward to next year, many of the same issues remain.  The oil glut will likely continue until 2017 as no country is voluntarily decreasing production and Iranian production is coming back onto the world markets.  However, production will likely decline slowly due to decreased investment in new drilling.  Consumption will likely grow slowly eventually bringing supply and demand back into balance.  Longer term say 5- 10 years down the road the pendulum may swing to the other extreme.

Never the less, I see reasons for cautious optimism.  We may continue to see an improvement in consumer spending which historically has lagged savings in gasoline by about 18 months.  The US dollar remains strong but has plateaued since March.  Therefore, the drag that the strong dollar has had on earnings may diminish.  However, additional FED rate increases could further strengthen the dollar.  Europe may increase its stimulus further and steps by China to reform its economy will eventually yield results.  Business spending which is likely flat in 2015 may increase moderately in 2016 with forecasts for a 4% increase.  The factors bolstering growth in business spending in 2016 include the December tax bill making permanent the research and development tax credit and faster capital equipment write-offs for small businesses.  Each year these have been extended late in the year, too late for many companies to take advantage of them.  Also helping next year will be congress’ recent reinstatement of the export-import bank which was allowed to lapse earlier this year over political wrangling.  The export-import bank guarantees loans for foreign entities to buy US goods something most other countries do but was called “corporate welfare” by some ideologues in Congress.  Furthermore the passage of the highway bill provides over $60BN a year in increased road and transportation projects a year for the next five years.  So, a reduction in political gridlock may be good for the economy next year.

In economic news this past week:

• The S&P/Case Shiller Home Price Index rose 5.2% year over year in October greater than the September year over year gain in September.
• The Labor Department Reported that first time claims for unemployment rose 20,000 to 287,000 in the prior week, worse than expectations.
• The Energy Information Administration reported

o   US Crude supplies rose 2.63 million barrels in the previous week.  For 2015 US inventory of crude oil has risen more than 100 million barrels.

o   US output of crude oil was 9.2 million barrels down from a peak of 9.61 million barrels in June.

Please call us if you have any questions.

Best Regards,

Loren C. Rex, CFP^®, AIF^®                                                                               Erik Smith

President                                                                                                           Partner

Generations Financial Planning & Wealth Management                269-441-4143

77 E. Michigan Ave, Suite 140

Battle Creek, MI  49017

Tel  269-441-4090

Carrie Fuce, Assistant 269-441-4091

Toll Free: 800-513-8180

Fax  269-441-4093

Visit our Website:  www.genfinplan.com

Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC.  Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor.  Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.

These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.