Markets End 2016 on a High Note

There are only a couple more trading days remaining in the year but it has certainly been a good year for many market participants. One of the most successful investors in the world, Warren Buffett saw his personal net worth grow by over $12 billion, more than anyone else in the country, largely thanks to the 24% appreciation of his company, Berkshire Hathaway (NYSE:BRK.A) Buffett is now worth $74 billion, making him the second wealthiest individual in the world, only behind his friend Bill gates, according to Forbes. It’s interesting how Buffett has been an open supporter of Hillary Clinton even before the presidential campaign started. But in a twist of events, most of his personal gains this year only came after Clinton lost the election in November. In the two days alone following the election, Berkshire Hathaway shares climbed 6%.

The second largest benefiting investor of 2016 is energy tycoon Harold Hamm. His wealth increased by nearly $9 billion this year. Due to the rising price of oil and gas his company, Continental Resources, experienced stock price gains of 125% since the start of the year. But the oil industry is far more volatile than a diversified, multinational conglomerate holding company like Berkshire Hathaway. Between 2010 to 2014 Harold Hamm’s net worth grew by $13 billion. But then the price of oil started to drop and by early 2016 he had lost about $13 billion. Finally, over the last 3 quarters, thanks to a recovery in oil prices, he has made back most of that $13 billion once again. He is currently worth about $15 billion. The boom and bust cycles of the energy sector can be hard to stomach, which is why putting all the eggs in one basket is generally not a good investment approach.

But you don’t have to be a billionaire CEO or entrepreneur to have a good financial year. The Dow Jones Industrial Index has returned about 14% during the year. The S&P 500 index is up about 10%, and even the Nasdaq is up by 9% so far this year, not including dividend distributions. This is slightly better than average performance for the stock market, assuming we don’t have a major correction in the next couple of trading periods.

In terms of currencies the British pound dropped after the Brexit event and hasn’t recovered since. But on the other hand the U.S. dollar has become stronger. The Russian Ruble is also up about 21%. This is due to stronger oil prices since Russia exports oil. But the biggest winner is actually not a traditional currency. The digital currency, Bitcoin, was the best currency performer in 2016, increasing in value by more than 100% as more people become interested in alternative forms of money. As for commodities, gold and silver started the year pretty strong but have pulled back throughout the later half of the year. Overall gold is still up 7% year to date, and silver has doubled that performance with an increase of 14%. Other hard commodities such as platinum, aluminum, and copper have stayed pretty much flat. The same can be said for agricultural goods like corn, wheat, soybeans, and coffee.

A lot has happened in the last 12 months. Going into 2017 the global financial markets look to be more stable. There are a couple of factors to keep an eye on however. The full consequences of Britain leaving the European Union is still not clearly understood. But we will know more as the events unfold next year. Also, what Donald Trump’s plans to do with the United States is still up in the air. So when he is sworn into office next month his policies will be closely scrutinized by many. Hopefully 2017 will continue to bring steady market returns for investors.

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