New Year's predictions are an enigma - one part educated evaluation of current events on the ground and how they'll effect specific issues going forward, and another part fingers-crossed guessing games, where witches brew and snake oil can be part of a prognosticator's formula.
But not here, of course: even with money-related 2016 predictions, which routinely rely on the great but notoriously unpredictable American consumer, we are pretty confident in our crystal ball to make this less hocus pocus and more of a science.
So let's give it a go with some personal financial predictions just the same, leveraging the expertise of some of the sharpest financial minds in the country:
1. Weaker economic growth for the U.S. - According to WalletHub.com, U.S. gross domestic product growth will be 2.4%, lagging the worldwide average of about 3%. "The United States economy is widely expected to be characterized by slower growth during 2016, with the word 'tepid' frequently being employed in the context of projections," analysts at WalletHub.com report. "This only makes sense, after all, considering that the U.S. has for years been at the vanguard of the recovery from the Great Recession and many economies are just now beginning to catch up. What's more, uncertainty borne from a variety of headwinds that emerged during the course of 2015 - which resulted in widespread estimate cuts during the year - is expected to limit growth in 2016."
2. A robust housing market - especially for sellers - That's the sentiment from Edward Pinto, co-director and chief risk officer for the International Center on Housing Risk at the Washington, D.C.-based American Enterprise Institute. "The National Mortgage Risk Index (NMRI), particularly for first-time buyers, will continue its upward trend that is now nearly three-years old," Pinto estimates. "Also, demand pressure resulting from continuing moderate economic growth combined with increasing leverage and limited housing supply growth will extend the seller's market that is now over three- years old." Pinto says this will cause home prices to once again grow faster than inflation and incomes. His expectation is for nominal home prices to increase about 5% in 2016.
3. Middle-class workers will live far away from their big city jobs - Reduced incomes, combined with a more expensive real estate market, will drive more middle- and lower-class Americans out of major cities. "For the most magnetic big cities, the largest risks are not terrorism but affordability and livability," says Marian Salzman, chief executive officer at Havas PR North America, which recently released its 2016 trend report. "Big cities are crowded, clogged and expensive. Faced with expensive housing, essential workers such as cleaners, restaurant staff and construction workers have to live a long way out. Even people in higher-paying jobs can hit a quality-of-life crunch, especially if they have a family. They find that too much of their salary is swallowed by basic living expenses. They realize that too much of their time is spent working, or getting around, to really enjoy what the big city has to offer."
4. Look for a weaker stock market - Expect lower stock market returns and less volatility, says Robert R. Johnson, CEO of The American College of Financial Services in Bryn Mawr, Pa. "The Fed recently raised the fed funds rate and will likely institute a series of rate hikes in 2016," he explains. "I would expect key interest rates to rise by at least 1% during 2016. Given that expectation, I would expect lower stock returns in 2016." Johnson notes that when interest rates were falling, the S&P 500 returned 15.2% annually from 1966 to 2013. Yet when rates were rising, the S&P 500 returned only 5.9% annually. Additionally, many pundits are calling for increasing volatility, but that may not be so. "Historically there has actually been less volatility during a rising rate environment than during a falling rate environment," he adds. From 1966 through 2013, the standard deviation of returns -- a measure of volatility -- was 16.3% when rates were falling and only 14.3% when rates were rising. I think the pundits calling for increased volatility have it wrong."
5. Fed rate hike means personal and small business loan payments could grow higher - David Nilssen, CEO and co-founder of Guidant Financial, a Seattle-based small business financing company, says that given the Federal Reserve's interest rate hike, Americans will now see loan payments rise modestly, including Small Business Administration (SBA) loans, unsecured lines of credit, business credit cards and peer-to-peer lending. "This additional expense could undercut cash flow and profitability for some, and the cost of credit will also rise compared to previous years," he explains. "However, the good news is that an increase of 0.25% probably won't force owners to shutter their businesses." Expect mortgage loans, credit cards, and auto loan rates to rise, too, in 2016.
We'll have to check in a year from now to gauge the accuracy of these predictions, but know they're all made by industry analysts who are experts in their field. In other words, bet on the predictions panning out, and plan your kitchen table financing accordingly in 2016.