Many investors were nervous about the outlook for this year, but few expected it to begin with a full-blown stock market bloodbath.
The first full trading day ended in carnage, as Chinese share prices crashed 7 per cent and global stock markets followed.
Chinese regulators halted trading in a bid to stem the panic and three days later had to trigger their new #x201c;circuit-breaker#x201d; system again, closing the market after less than 15 minutes, making it the shortest trading day in the country#x2019;s history.
The United States suffered the worst opening week to a year since records began, with the Dow Jones Industrial Average falling 6.2 per cent while the United Kingdom, Europe, Asia and other emerging markets also crashed.
In the Arabian Gulf region, Dubai#x2019;s financial market fell 5.8 per cent in that first desperate week. Abu Dhabi was down 4 per cent, while Saudi Arabia was the hardest hit, falling almost 10 per cent.
More than US$2.3 trillion was wiped off the value of global share prices in just five days, according to the Samp;P Global Broad Market index.
UAE and Saudi markets fell again on Tuesday after oil sank to a 12-year low of about $30.50 per barrel amid growing talk that it could fall to $20 or even lower. Throw rising US interest rates into this toxic mix and you can see why growing numbers of analysts believe there is a reckoning at hand.
The sense of panic only grew when the British bank RBS issued a note advising clients to #x201c;sell everything except high-quality bonds#x201d;, as this would be a #x201c;cataclysmic#x201d; year for markets, with share prices likely to fall another 20 per cent, and oil to plunge to $16 per barrel.
It urged clients to beat the forthcoming rush to sell, warning that: #x201c;In a crowded hall, exit doors are small#x201d;.
If the financial world is in disarray, the political world looks equally desperate, with global acts of terror almost a daily occurrence and Saudi Arabia and Iran squaring up to each other, which will only make finding a solution to the Syrian civil war even harder.
Joshua Mahoney, a market analyst at IG Index, says the investor uncertainty has further to run. #x201c;If markets abide by the mantra of starting as you mean to go on, we could be in for a seriously messy 2016.#x201d;
Fear over China is at the heart of this year#x2019;s problems, as the authorities continue their increasingly desperate battle to avoid a hard economic landing.
Mark Mobius, the renowned fund manager at Templeton Emerging Markets, says the #x201c;entire psychology of the market#x201d; has been hit by China#x2019;s plunging currency and fears over how the US Federal Reserve#x2019;s decision to raise interest rates would hit other economies.
Further interest rate hikes are likely to follow, possibly as many as four this year, raising global borrowing costs and upping the pressure on indebted businesses and individuals.
Like most analysts, Mr Mobius predicts more trouble to come. #x201c;Volatility is increasing in many markets, and it#x2019;s something investors will likely need to learn to live with.#x201d;
However, he denies the Chinese economy will come crashing down, as its GDP is expected to grow 6 per cent this year. #x201c;The fundamentals in China are still excellent, in our view. It is one of the fastest-growing economies in the world, even if the growth rate has decelerated.#x201d;
After a dogged 2015, when the Middle East was in turmoil, oil and commodity prices slumped, global deflation reared its head and China went through Black Monday, this year was always going to be tough.
HSBC delivered an early signal by listing the 10 risks investors face this year, including a fresh euro-zone crisis, Chinese corporate defaults, a US recession and a rise in the number of stock market #x201c;flash crashes#x201d;.
Jeremy Batstone-Carr, the head of private client research at Charles Stanley Stockbrokers, has been a worried man for some time.
His faith in the global economy was shaken by the volatile start to the millennium, which featured the technology crash, September 11 terror attacks, the financial crisis, a euro-zone meltdown, Middle East instability and increased sabre-rattling by China and Russia.
But his biggest worries are two underlying dangers that most people choose to ignore: debt and demographics.
Mr Batstone-Carr says: #x201c;The world is drowning in debt while developing countries face falling birth rates and ageing populations.#x201d;
Both contributed to the financial crisis, and both have only worsened since, he says. #x201c;Global debt has increased rather than fallen, while the only positive action on demographics was China#x2019;s recent decision to scrap the one-child rule.#x201d;
Japan is the poster child for both problems, Mr Batstone-Carr says, with debts worth a staggering 245 per cent of its annual GDP and a fertility ratio of just 1.42, against the 2.07 that countries need to keep their populations stable.
Where Japan leads, the West is following. Mr Batstone-Carr says this paves the way for an even bigger financial crisis, and central bankers have already expended their ammunition, such as quantitative easing and low interest rates, on the last one.
All major economies have higher levels of borrowing relative to GDP than they did in 2007, according to the McKinsey Global Institute.
Global debt has grown by $57 trillion, posing new risks to financial stability and threatening global economic growth, it warns.
Last year, total debt stood at 286 per cent of global GDP, and the pile continues to rise as emerging markets try to prop up their ailing economies. China#x2019;s has quadrupled in just seven years, to $28tn from $7tn.
These challenges are harder to bear as ageing populations demand expensive pensions and health care, and will have to be supported by a dwindling band of younger workers.
Mr Batstone-Carr says: #x201c;No amount of economic chicanery can get around the two unavoidable threats of debt and demographics.#x201d;
Plenty of people saw this year#x2019;s crisis coming. Last year, the fund manager Crispin Odey, of Odey Asset Management Group, argued that stimulatory measures such as quantitative easing and low interest rates have bloated asset prices, and stocks in developed markets #x201c;need to fall 30 to 40 per cent to be compelling#x201d; again.
Robin Griffiths, the chief technical strategist at ECU Group, said last year that stock market valuations, as measured by the price-to-earnings ratio, have only been this high on three occasions since 1882: in 1929, 2000 and 2007. No prizes for guessing what happened next.
Ashley Owen, the head of investment strategies at advisers AES International in Dubai, says the pessimists look prescient today. #x201c;Global debt levels are still at record highs, and prolonged low interest rates only made things worse.#x201d;
Mr Owen says the world also remains vulnerable to #x201c;great unknowns#x201d; such as geopolitical risk, which seems to be worsening by the day. #x201c;Shocks seem to come out of nowhere.#x201d;
One shock that certainly came out of nowhere was the collapse in the oil price, which traded at about $115 per barrel just 18 months ago, a figure unthinkable today.
Cheaper petrol may help to sustain spending in consumer countries such as the US, China and India and in Europe, but it has come at the expense of producer nations in the Middle East and beyond.
The oil sector now accounts for about 50 per cent of Abu Dhabi#x2019;s GDP, according to data from Statistics Centre Abu Dhabi.
Dubai has far greater diversification, with oil making up less than 2 per cent of GDP, the Dubai Economic Council recently calculated.
Faisal Durrani, the head of research at the global property consultant Cluttons, says low oil prices will raise the pressure on the UAE property market.
In November, Cluttons reported that residential property prices in Dubai had fallen for five successive quarters, and were likely to fall another 3 to 5 per cent over the next year.
Mr Durrani says Abu Dhabi#x2019;s property market is in the firing line: #x201c;Office space consolidation by local and global oil corporates threatens to undermine rents and may lead to a supply glut.#x201d;
But he remains optimistic, arguing that this may be offset by government investment in sectors such as health care, aviation, education and hospitality. #x201c;Growth in these areas may offer some respite to the residential property market.#x201d;
Mr Durrani says the outlook for Dubai remains positive. #x201c;With mega infrastructure such as the $32 billion expansion of Al Maktoum International Airport and the hosting of the World Expo in 2020, the prospects for the residential and commercial markets are brighter.#x201d;
Keren Bobker, a senior consultant at Holborn Assets and a columnist for The National, warns that markets have to cope with another toxic element this year: the US presidential election, so far dominated by the Republican hopeful Donald Trump.
Ms Bobker says investors need to stay calm, rather than simply panic and sell. #x201c;If your portfolio is properly diversified across several markets and reflects your attitude to risk, you should be able to tolerate any short-term falls in value.#x201d;
You need to review your portfolio to see whether this is the case. #x201c;Far too many people have been unwittingly put into volatile, high-risk funds, which makes them vulnerable.#x201d;
There is no such thing as a safe bet these days, Ms Bobker says. #x201c;No one can buck markets, but the fluctuations tend to be ironed out over time.#x201d;
In volatile times it makes sense to invest small regular amounts every month rather than making large lump sum investments. This way you can turn volatility to your advantage, because your contribution payment will buy more units in your chosen funds when markets fall, and you will benefit when they recover.
Ms Bobker adds: #x201c;I expect further turbulence this year, but if you are sensibly invested for the long term you should be able to ride it out.#x201d;
Dan Dowding, an investment adviser at Killik amp; Co in Dubai, says investors can still make money from the stock market, but through careful stock picking rather than simply buying index trackers.
#x201c;Too many big companies are boring businesses with little competitive advantage and second-rate management. The UK#x2019;s FTSE 100 index is a good example. Today it is about 10 per cent lower than it was 15 years ago.#x201d;
The major indexes fail to reflect the technological revolution affecting transport, energy, health care and social media, he says.
Mr Dowding says: #x201c;Facebook recently reported 1.49 billion monthly active users and WhatsApp has 900 million users. These two companies did not even exist 15 years ago.#x201d;
He says we live in an age of #x201c;creative destruction#x201d;. #x201c;Just look at the businesses that have been destroyed by Apple, Netflix, Google and Amazon. The numbers will be dwarfed when the same thing happens in the oil, auto and pharmaceutical industries.#x201d;
The world may be heading for further turbulence, but if Mr Dowding is right, short-term destruction will fire new types of creativity.
There is other good news out there, if you look for it. US employment figures continue to rise. Europe is growing thanks to monetary stimulus. The UK remains robust, although growth is easing off.
Tim Edwards, the senior investment director of index investment strategy at Samp;P Dow Jones Indices, says history suggests worse is to come: #x201c;Historically speaking, years that have started badly have more frequently ended badly #x2013; and to a greater extent than might be supposed.#x201d;
The truth is that nobody can predict the future, and investors who try to do so invariably fail. By selling up now, you will only crystallise your losses.
Brave investors might even want to take advantage of market falls to pick up shares at reduced prices.
They should heed recent comments from Christian Mueller-Glissmann at Goldman Sachs. He said the China-led rout may get worse, and when it does, that is the time to buy. Are you brave enough to buy shares today?
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