Yahoo Finance Year in Review: the Biggest Financial Headlines of 2016
The year 2016 did not want for financial news. A comprehensive accounting of the business stories that broke over the last 12 months could fill a book -- but since most people would rather move on with their lives and see what 2017 has in store, a brief recap is probably more appropriate.
With that said, here's a quick glance at the top financial headlines of 2016.
Macro events
The stock market got off to its worst two-week start ever. Stoked by concerns over China's slowing economy and its depreciating currency, Wall Street began 2016 in a bona fide death spiral; major indices took about a 10 percent haircut in the first two weeks of trading, setting a record.
[Read: Wall Street Predictions for 2017.]
The plunge of oil and its resultant rally. While the stock market plunged, so did oil prices. Both ultimately recovered from the early stumble, but that wasn't an obvious outcome at the time.
"The worldwide oversupply of oil resulted in significant price swings from approximately $100 per barrel in the third quarter of 2014 to below $30 in early 2016," according to Dean Price, a partner at Opportune LLP. "The rebound above $50 per barrel can be attributed to supply rebalancing and the recent OPEC announcement to reduce output in 2017."
Brexit. In June, a major financial event took place. The U.K. voted to leave the European Union in a shocking referendum, causing mass confusion about the future of European trade, the value of the British pound and Britain's financial institutions. U.S. markets swiftly fell, then rallied to regain their losses.
A soft IPO market. 2016 was the worst year for IPOs since 2003, with money raised through new issues down about 40 percent.
"There's no question the IPO market is softer," says Jonathan Gertler, CEO and managing partner of Back Bay Life Science Advisors. "There's volatility in our economy. There was an exuberant market that drove valuations exceedingly high," specifically in the biotech industry.
"There's also a lot of uncertainty right now in the world," he says. Uncertainty, as a rule, is never good for stocks. Especially not high-risk stocks, such as newly public companies.
The Trump bump. The populist trend of 2016 continued with Donald Trump's surprise election on Nov. 8, an event that roiled markets in the minutes that followed, but ultimately resulted in a sustained holiday rally. Major indices added between 6 and 12 percent through the end of the year as investors bid up stocks in anticipation of deregulation, lower taxes, inflation and infrastructure spending.
Rising rates. The Federal Reserve decided to raise interest rates by 25 basis points in its December meeting, citing higher home prices, low unemployment and improving confidence in the economy as it projected three additional rate hikes in 2017.
Dow 20,000. As markets hit record highs in the closing weeks of the year, the Dow began to flirt with the 20,000 mark for the first time. While Dow 20,000 is a fine round number with a lot of zeros, it's primarily a psychological milestone with little meaning for investors.
Individual company news
The Mylan EpiPen scandal. Pharmaceutical giant Mylan (ticker: MYL) came under fire from consumers and Congress for marking up the price of the EpiPen, a vital treatment for life-threatening allergic reactions, more than 400 percent throughout recent years. (This while Mylan CEO Heather Bresch saw her pay package soar from $2.5 million to $18.9 million.)
[See: 7 of the Worst Stocks to Buy for 2017.]
"We should certainly reward risk, but I think the EpiPen issue was an outlier and a distraction from what our industry is about," Gertler says. "It's about innovation and bringing solutions to unmet needs. Taking advantage of a market window to jack up prices is not really a tolerable behavior."
Microsoft Corp. (MSFT) buys LinkedIn Corp. (LNKD) for $26.2 billion. "Even if you believe Microsoft overpaid, the fact that the social network furthers careers worldwide, develops IT skills and therefore creates a larger market for Microsoft's high-tech product is more than enough justification for Satya Nadella to have pulled the trigger on the deal," says Ethan Ayer, CEO of Resilient Network Systems.
"Having access to the authoritative data behind 470 million people is a very powerful asset," Ayer says.
Tesla Motors (TSLA) buys SolarCity Corp. While Tesla CEO Elon Musk may be the closest thing to a real-life Iron Man, his decision to acquire SolarCity ( SCTY), a rooftop solar panel installer in which he was the largest single shareholder, was controversial. The $2 billion acquisition of a deeply indebted and cash flow-negative renewable energy company -- of which his cousin was CEO -- raised concern among analysts.
"For TSLA shareholders in the short term, I thought it was dilutive and distractive," says Efraim Levy, an equity analyst at CFRA. "It was essentially a bailout of SolarCity. You're not going to see significant benefits during the next 12 months."
Wells Fargo & Co. fake accounts scandal. A multiyear scam that created millions of unrequested, fee-generating customer accounts was unearthed at Wells Fargo ( WFC), a bank traditionally considered a moral actor. Despite the scandal reaching high up in the bank's management, 5,300 employees were fired for their roles in the scam.
Then-CEO John Stumpf was roasted on live TV by a House panel in September about the incident. He stepped down weeks later, taking more than $130 million in compensation with him.
Samsung's exploding phone. Apple's ( AAPL) biggest competitor in the smartphone market, Samsung, was forced to recall all of the Samsung Galaxy Note 7 phones that hit the market after a spate of incidents where the battery overheated, causing the phone to explode. The recall of the model, which was supposed to legitimately compete with the iPhone 7, instead cost Samsung an estimated $3 billion.
A changing iPhone. The iPhone 7 was released, to mixed reactions, without a headphone jack. Quarters earlier, year-over-year iPhone sales fell for the first time ever.
AI starts taking over. "2016 saw the rise in popularity of tools like Amazon ( AMZN) Echo and the proliferation of AI-powered virtual assistant bots, representing a new wave of intelligent software that will only gain momentum in the market," says Justin Moore, founder & CEO of Axcient. "Expect these tools to become smarter and more adept -- and to raise questions of how we will do our jobs in the future."
One beneficiary of this trend was chip-maker Nvidia ( NVDA) and its shareholders, who saw NVDA stock go on a 200 percent-plus rally in 2016. Nvidia makes chips that are used in artificial intelligence, gaming and several other fields.
Deals, fads and failures. Pokemon Go boomed in its debut before quickly fading. Twitter ( TWTR) buyout rumors ended up just being rumors. Verizon Communications ( VZ) announced it would buy Yahoo ( YHOO), which was wounded by hacks that compromised as many as 1 billion accounts. Pfizer ( PFE) almost bought Allergan ( AGN) in a tax inversion deal, only to see it scuttled by the Treasury Department. Chipotle Mexican Grill ( CMG) stock continued its epic meltdown as customers were slow to return following a series of food safety scares. And Valeant Pharmaceuticals ( VRX) kept crumbling.
[See: 7 of the Best Stocks to Buy for 2017.]
If 2017 is half as eventful as 2016 was, investors are in for an exciting year.
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