“The Fed sent a very strong signal to the markets, and few are noticing” according to at least one expert on Fed policy.

Instead, Wall Street firms are telling investors to remain bullish for 2016. History shows that the new year could bring a challenging stock market environment that will leave many investors longing for the relative comfort of 2015. Although stocks have little to show for this year, small gains are better than losses of any size.

Most experts now expect the Federal Reserve to raise interest rates in December. In the past, this has created headwinds for stocks.

In "Invest With the Fed," authors Robert Johnson of The American College of Financial Services, Gerald Jensen of Creighton University and Luis Garcia-Feijoo utilize a combination of the discount rate and effective fed funds rate to distinguish alternative monetary policy regimes. 

They find that as both the effective fed funds rate and discount rate are rising, returns to equities are dramatically lower than when those rates are falling.  From 1966 through 2013, when both rates were falling, the S&P 500 returned 15.2% compounded annually.  Over that same time period when both rates were rising, the S&P 500 returned 5.9%.  

With Fed tightening on the table for next year, 2016 is likely to be disappointing to many investors. Buy and hold strategies that worked well in the past might not be the best choice for the new market environment.

Institutional traders will rotate between sectors pursuing gains and individual investors can benefit from following short-term trends rather than counting on a rising tide to lift all boats.