6 predictions for the share market in 2016

Credit: Online Fortune Teller

Only a complete fool prints predictions for the year ahead, so I thought it worth giving a few of my own as to what might be the key investment trends and outperforming shares in 2016.

Naturally if most of the below predictions come true in 2016 I will be sure to remind readers at the end of the year, although if they prove idiotic this article will be quietly forgotten as though it were never written.

6 Predictions for 2016

  1. Globally focused online education and software providers working to improve education standards in the school age market will pick up steam, with shares in Kip McGrath Education Ltd (ASX: KME) and 3P Learning Ltd (ASX: 3PL) enjoying a strong year.
  2. The best Software-as-a-Service (SaaS) businesses will also enjoy a strong year thanks to the scalable business models, high margins, and large global addressable markets. Shares in cloud accounting business XERO FPO NZ (ASX: XRO) will soar higher on evidence it’s making genuine inroads into the giant U.S. market.
  3. Retail shareholders in National Australia Bank Ltd. (ASX: NAB) will get dudded by management again after their shares in the newly-listed Clydesdale and Yorkshire Bank fall sharply. This after NAB’s management palmed off the troubled UK bank to its own retail shareholders in another textbook example of bankers being bankers.
  4. The share price of supermarkets business Woolworths Limited (ASX: WOW) finishes 2016 lower than the level it starts the year. This as it fails to reverse a same-store sales slide at its supermarkets, while rival Coles and others continue to steal market share. Woolworths has serious management issues and problems with its Masters business, all of which suggest more downward pressure on earnings and the share price.
  5. US equity markets will outperform their European and Australian peers, while investors with exposure to companies making US dollars continue to see outperformance. The healthcare space is one sector, while diversified financials with the twin tailwinds of US equity strength and US dollar exposure may do especially well. Two to climb higher are Macquarie Group Ltd (ASX: MQG) and Magellan Financial Group Ltd (ASX: MFG).
  6. Australia’s digital economy is set to take off and investors who position their portfolio accordingly for the years ahead will outperform the market. The internet and its global reach gives companies previously unthinkable opportunities to build global businesses at eye-wateringly high margins and returns on invested capital. One to climb higher is REA Group Limited (ASX: REA) as it continues to invest in its growing collection of digital property businesses.

Unfortunately I cannot see much good fortune or happiness for investors with too much exposure to the mining sector in the year ahead either...

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Motley Fool contributor Tom Richardson owns shares of Kip McGrath Education Centres Ltd., Macquarie Group Limited, Magellan Financial Group, REA Group Limited, Xero and 3P Learning.

You can find Tom on Twitter @tommyr345

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia owns shares of Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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