Energy Companies, Banks Led Stocks Rally in 2016

In 2016, the Standard & Poor’s 500 index jumped 11% and bounced back from a flat result the year before, and energy companies and banks made some of the largest gains as investors bet on a stronger economy that will lead to more lending and spending, AP reported.

Here’s a look at how some industry sectors in the S&P 500 fared for the year:

  Energy: Up 25.5%

At the beginning of the year it looked like 2016 would be another painful one for energy companies. In February oil traded at $26 a barrel, down from more than $100 in mid-2014. But over the next few months oil prices rose gradually to above $50, which reduced the scope of their losses.

Late in the year, OPEC and other oil producers agreed to cut their production in 2017. Oil and gas company Oneok more than doubled in value for the year while Chevron had its best year since 1989.

  Financials: Up 22%

Banks and other financial companies sank early in 2016 as investors worried about slowing global economic growth. After that they struggled as the Federal Reserve continually held off on raising interest rates.

But the sector caught fire leading up to the election and afterward, as investors felt banks will be major beneficiaries of a (US president-elect) Donald Trump administration. Huge gains in the weeks after the election took bank stocks to their highest levels since 2008.

  Telecommunications: Up 18.3%

Phone company stocks surged early in 2016 as the market got off to a historically bad start. Investors bought those stocks, which are often compared to bonds because of their large dividend yields and relative stability. Later the stocks gradually lost steam as investors saw signs the economy was picking up and hoped for faster growth.

  Industrials: Up 17.8%

Companies that make construction equipment, engines and aircraft also made large gains as the US economy picked up steam. Investors bet that the election of Trump, and a Republican Congress that could approve his spending proposals, will lead to more spending on construction, manufacturing, and transportation.

  Materials: Up 16.1%

Companies that make materials like packaging, specialty chemicals and mine for metals also rebounded, partly because precious metals prices bounced back in 2016 after several years of losses. Copper, which is linked to expectations for economic growth because of its uses in construction, climbed 18%.

  Technology: Up 14.1%

Technology companies rose for the eighth year in a row. The stocks surged this summer as the US economy appeared to gain strength, while critical overseas markets also looked healthier. The technology sector didn’t do as well following the election, however, as investors wondered if Trump’s trade and immigration policies and his inflammatory rhetoric would hurt their sales overseas.

  Utilities: Up 12.4%

With government bond yields at their lowest levels in many years and investors nervous about the state of the economy, utility companies were in the unusual position of leading the market in early 2016. Electric and gas utilities were a safe harbor for worried investors. But as confidence in the economy picked up, they lost that leadership position.

 Consumer Discretionary: Up 6.1%

Consumer discretionary stocks, including retailers, media companies and other companies that rely on consumer spending, rose for the eighth year in a row as shoppers remained a critical part of the still-growing US economy.

  Consumer Staples: Up 3.3%

Companies that make and sell common household goods are generally considered a safe investment. But in 2016, investors preferred stocks that will benefit more from faster economic growth. The stocks did rise for the eighth consecutive year, however.

  Sanction-Free Iran

The nuclear deal between Iran and six world powers removed the sanctions put on the Islamic Republic of Iran. Removal of the sanctions had wide ramifications for the global economy. Iran can now increase its revenue from oil exports by $10 billion by next year. The European Union has ended restrictions on Iranian trade, shipping and insurance.