S&P 500 Dips to 1,750; Oil Slides to $25 in 2016: Analyst

Don’t hold your breath for a bullish equity market in 2016. Ian Winer, head of equity trading at Wedbush Securities, based in Los Angeles, expects the S&P 500 to reach 1,750 in 2016, a 14 percent drop from its current level of 2,030. ‘The fact that rates are going to rise is key to what’s going to happen in 2016,’ he said. ‘Ultimately, that’s going to determine corporate management behavior: either they’re going to choose to spend on their business in the form of capital expenditures and hiring, which they haven’t, or continue to financially engineer their earnings through buybacks and M&A.’ Federal Reserve officials see the fed funds rate reaching 1.375 percent by the end of 2016, according to its closely watched dot-plot chart, released Wednesday. That’s when the central bank announced a historic 25 basis point increase in rates, moving them off crisis era levels. Winer said higher rates make buybacks less appealing. ‘Now [companies] have to figure out how to get growth and, as of late, they’ve already been punished by activist investors if they spend too much,’ he said. ‘It sets up for a difficult 2016 because with rates going up you’re not going to get the same multiple expansion and you could have a situation where 2016 earnings are down year-over-year.’ Winer speaks with TheStreet’s Scott Gamm.