Five of the Best Trades of 2016 (So Far)

The year 2016 has been a trying one for the global financial markets. Geopolitical tensions, volatile oil prices, Brexit and the US presidential elections have all had a major impact on traders’ portfolios. But amid the drama has emerged some clear winners. The following article looks at five of the best trades of 2016 (so far).

Utilities

Utilities are easily Wall Street’s best performing sector so far this year. The S&P 500’s utilities index is up more than 9% for the year. By comparison, the large-cap S&P 500 Index is down around 1%, reversing earlier gains as US election jitters weighed on the markets. Utilities encompass a broad range of companies operating in the electric, gas and water utilities industries. Since they provide necessities, utilities might typically be much more recession-resistant than other sectors of the financial markets. This partly explains their strong performance this year.

Japanese Yen

The yen has defied the odds this year despite repeated efforts by the Bank of Japan (BOJ) to boost export competitiveness. The yen has gained roughly 17% against the US dollar since the start of 2016, and at one point reached its highest level since 2013. The Japanese currency is one of Asia’s preferred safe havens, that might make it an important play for investors looking to escape volatile markets. In fact, the yen has been so strong this year that it has triggered intervention warnings from the Japanese government.[1]

Gold

Despite having a volatile month, gold is one of this year’s strongest performers. The yellow metal is up around 22% in 2016. Bullion spiked in the immediate aftermath of Brexit to reach its highest level since early 2014. Since then its path has been choppy, but analysts forecast steady progress for bullion well into next year. This means that gold’s recent slump may have been a good opportunity to enter the market.

Silver

Like gold, silver has benefited from risk aversion. However, the grey metal has also had other major catalysts, including heavier industrial demand than its yellow counterpart. Silver is mined primarily as a by-product of base metal extraction. This has made it more susceptible to supply shortages in the wake of a broader mining slowdown. And unlike gold, silver was considered significantly oversold through the beginning of the year. Silver prices have skyrocketed more than 30% this year, reaching multi-year highs on several occasions.

Gasoline

Gasoline prices have benefited from the general uptrend in the energy markets since the start of the year, but have also benefited from temporary closures at refineries. A fatal pipeline blast in Alabama last month resulted in the biggest gain in gasoline prices in eight years.[2] Gasoline futures are up more than 2% and in October reached their highest level since late 2014.

[1] Netty Idayu Ismail and Anooka Debnath (February 9, 2016). β€œYen Advance Is So Strong It’s Triggering Intervention Warnings.” Bloomberg.

[2] Dan Murtaugh and Laura Blewitt (October 31, 2016). β€œU.S. Gasoline Jumps Most Since 2008 After Pipeline Blast.” Bloomberg.

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