A Look At 3 Big Surprises In 2016 And 1 Big Investing Lesson to Learn from Them All

There were a good number of surprises that popped up in 2016.

My fellow Fool Lawrence Nga had covered some of 2016’s major events in  here and here . As Lawrence noted, 2016 started with declines in stock markets around the world, Singapore’s included.

This was the first surprise of the year.

A major market decline

In the midst of the carnage in early January 2016, an analyst from Scottish bank, Royal Bank of Scotland, came out screaming to investors to “ sell everything ”.

For a brief moment, the analyst appeared to be onto something. The SPDR STI ETF (SGX: ES3), an exchange traded fund that mimics the fundamentals of Singapore’s market barometer, the Straits Times Index (SGX: ^STI), closed 2015 at $2.95 and promptly receded to a low of $2.55 in mid-February 2016. That’s a decline of 13.5% in less than one and a half months.

But this changed within a couple of months.  By 21 April 2016, the SPDR STI ETF was hitting a high of $2.97. The ETF ended 2016 at a price of $2.94, just one cent less than in 2015.

The next surprise for 2016 came near the middle of the year.

Oh, Brexit

On 23 June 2016, citizens of the United Kingdom voted for the country to leave the European Union.

The vote surprised many, including stock markets around the world. The SPDR STI ETF, which closed at $2.85 on the day of the vote, fell to as low as $2.78 the very next day. The effect of the Brexit surprise did not last long, though.

By 30 June 2016, the SPDR STI ETF closed at $2.88. And we know just where the ETF ended up by the end of the year.

Trump wins the US elections

In a similar manner to Brexit, Donald Trump’s win in the November 2016 US presidential election was unexpected.

On 8 November 2016, the day of the US election polls, the SPDR STI ETF closed at $2.88. The next day – as the results of Trump’s win came out – the SPDR STI ETF closed at $2.84, a fall of 1.4%. US stock market futures even showed big declines following news of Trump’s victory.

But the effects from Trump’s win did not last. On the following day, the SPDR STI ETF closed at $2.88. When the US stock market opened following the polls, stocks there ended the day with gains instead.

The big lesson

If you did not look at the Singapore stock market for the entire 2016, you would have thought that no big changes or surprises had happened during the year.

Therein, lies a good lesson in long-term thinking for investors.

When we look at the stock market over short time periods measured in months – as we had above – it looks like something that is rife with turmoil and surprises. But if we start to lengthen our view beyond days and months into years or even decades, we begin to see a very different picture. As I had mentioned earlier, the SPDR STI ETF ended 2016 at nearly the same price from the year before.

That’s the power of taking a long-term view.

And with that, I want to show a tweet by my US colleague, David Kretzmann.  

For all the surprises that happened in 2016, the US stock market, represented by the S&P 500, closed the year with a 9.5% gain.

If you want to learn more about investing and to keep up to date on the latest financial and stock market news, you can sign up for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore

Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.