2015 saw the increased use of crowdfunding and private investment in Fintech firms – but also a decrease of IPOs and trades on the stock market. So what does the future hold for the stock market? In the modern world, has the traditional ambition to graduate to public company become irrelevant? Increase in private funding Fintech, one of the largest growth sectors, remains for the most part privately funded. Far fewer tech companies than expected floated on the stock market in 2015, instead choosing to stick with the copious private investment being offered and keep their finances away from prying eyes. Private funding rounds totalled $51 billion, according to CB Insights – more than six times the $8.26 billion raised in US tech and Internet public offerings this year. The number of companies in the industry did go public, 48, was one of the lowest ever according to data compiled by Bloomberg and many such as Etsy have share prices hovering at below IPO levels; market volatility has, understandably, led to many companies delaying their IPOs. Increase in crowdfunding The growth of crowdfunding has meant that finding hedge funds or very wealthy angels to invest is not the only way to achieve private funding – funding from the public is also now a viable option and has grown exponentially over the past couple of years. Crowdfunding five years ago was a relatively small industry, accounting for $880 million in 2010. However, the crowdfunding industry grew to over $16 billion in 2014 and is on track to account for more funding than venture capital. The World Bank estimates that crowdfunding will reach $90 billion by 2020, but if the current rate of growth continues, that figure will be hit by 2017. Crowdfunding has revolutionised the world of business finance and has been transformed into a viable form of investment, encouraging many companies that perhaps would have looked at going public to stay in the private sphere a little longer. Decrease in the market’s popularity 2015 was a rocky year for the stock market, hit by crises in both Greece and China over the summer, and so far 2016 hasn’t been much better. It seems that companies are picking up on the risks associated with the market and, whilst there is ready private funding available, staying out of the public sphere. Data going back 25 years shows that new IPOs are steadily decreasing, and 2015 was another bad year. The annual rate of companies joining global stock markets halved in the decade after 2000 compared with the decade before, according to the Organisation for Economic Cooperation and Development. Furthermore, the volume of trades on the London Stock Exchange has steadily declined since 2008, with overall activity in the stock market decreasing over the past eight years. This inactivity, combined with the uncertainty and volatility of the stock market, could well be a reason why private companies considering floating are staying away.

So is this the end of the stock market as we know it? Whilst unicorn companies are riding a wave of private investment at the moment, in the long term this may not continue. Talk is already rife on the subject of whether companies such as Dropbox, which is currently valued at $10 billion, are worth their lofty valuations when their technology is such a fast-moving industry and staying ahead of the crowd is so difficult. Crowdfunding is an excellent option for raising short rounds of cash for short term expansions, but is not really a match for the amount of capital offered by floating on the stock exchange. However, over the past decade, there have certainly been changes to the way companies aim to expand and finance their business – with the general trend leaning towards keeping companies privately-owned for as long as possible. And with fewer regulations to comply with and a lesser need for transparency, its easy to see why.

Miranda Wadham on 06/01/2016

The US bull market will enter its seventh year in 2016, having restored some $15 trillion to share prices since 2009. At 82 months, the advance in the S&P 500 Index is poised to become the second-largest ever in 2016, eclipsing the 1950s bull market that saw share prices nearly quadruple. Despite the rally, the past seven years have not been pretty. We still aren’t sure whether the US economy is strong enough to stand on its own, or whether the bulk of its gains can be attributed to trillions of dollars in Federal Reserve stimulus and seven years’ worth of rock bottom interest rates. 2016 is expected to be a challenging year for the global financial system. Several issues stick out like a sore thumb, reminding investors that protection is the new objective in a low-yielding environment. 2016: The Year of Uneven Growth The global economy is forecast to grow 3.6% in 2016, according to an October estimate by the International Monetary Fund (IMF). However, there will be strong divergence between economies all over the world. Eurozone growth isn’t expected to be much stronger than it was this past year, while Japan is expected to rebound only modestly from a disappointing 2015. In emerging markets, Russia and Brazil are expected to contract next year, while China will enter year three of a protracted slowdown that is expected to continue for the foreseeable future. This is the backdrop that will define traders’ experiences next year. 2016: The Year of Modest Stock Market Gains While it’s difficult to predict an all-out bearish reversal for global stocks, it’s growing abundantly clear that 2016 “will have pretty much nothing to offer investors,” according to CNBC’s Jeff Cox. Goldman Sachs recently predicted that the S&P 500 will end 2016 close to where it began. European stocks are expected to lead the way next year, outperforming emerging markets as well as Wall Street, according to a recent poll by Reuters. However, European markets are expected to remain below peak levels reached back in April 2015, suggesting that growth will be hard to come by next year. Investors can expect to see continued volatility in China, as the world’s second-largest economy adjusts to a lower-growth environment. In India, stock prices are expected to regain their footing, although the overall trend is less optimistic than it was just a few months ago. Meanwhile, Brazil’s stock market is expected to “remain a very risky investment in 2016” amid a national recession. 2016: The Year of the US Dollar The dollar’s extreme bullishness leaves much to be desired for US multinationals, which are experiencing an earnings recession. Earlier this year Wall Street posted its first back-to-back quarters of earnings decline since 2009, thanks in large part to a more expensive greenback. The dollar is expected to strengthen even further next year, placing more pressure on US exporters. Combined with waning international demand, this could place added strain on the US manufacturing sector, which contracted in November for the first time in three years. Will a manufacturing recession force the Fed to delay future rate hikes? Only time will tell. 2016: The Year of Weak Commodities If weak international growth and weak equity prices weren’t enough, how about a continuing commodities recession? It’s becoming abundantly clear that commodities may struggle mightily in 2016 under the weight of a stronger dollar and uneven global demand. The price of gold is expected to fall closer to $1,000 an ounce in early 2016 before staging a modest recovery for the rest of the year. Meanwhile, oil prices continue to search for a bottom after a devastating 18-month rout that has pushed some global economies into recession. Both energy and precious metals are expected to weaken further next year. This content is sponsored by easy-forex, an easy-to-use online trading services provider. For more information on their service, visit easy-forex.com. Risk warning: Forward Rate Agreements, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you understand fully the risks involved and do not invest money you cannot afford to lose. Our group of companies through its subsidiaries is licensed by the Cyprus Securities & Exchange Commission (Easy Forex Trading Ltd- CySEC, License Number 079/07), which has been passported in the European Union through the MiFID Directive and in Australia by ASIC (Easy Markets Pty Ltd -AFS license No. 246566).