Ten expert predictions for 2013

It’s that time of year when the pundits dust off their crystal balls and offer their thoughts on where key markets are heading in 2013. Here are ten of our favourites, along with our thoughts.

A good year for US Treasuries… 

Jeffrey Gundlach, DoubleLine Capital

MoneyWeek has long been warning about the risks of piling into the corporate bond market as investors have pushed prices up in their quest for yield. Meanwhile, government bond prices have been pushed up too by investors looking for a safe haven for their capital. Nonetheless, Jeffrey Gundlach, one of America’s most successful fund managers, predicts a rosy 2013. The way Gundlach sees it, as long as the Federal Reserve keeps buying bonds, prices will carry on rising, so “it’s not a bad time to put some money to work in the bond market”. He predicts a ten-year T-bill will return 3% in 2013.

.…and Japanese stocks will deliver too

MoneyWeek has long felt that beaten up Japanese stocks are due a boost. In the last few months that’s started to happen, but Gundlach thinks there is more to come. Although he warns there “may be a pullback in the short-term” he reckons the Nikkei 225 will deliver a total return of 20% in 2013.

‘Big Four’ central banks to keep rates low

Martin Wolf, Financial Times

“The monetary policies of the US Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England are… extraordinarily loose”, notes Wolf. “Yet there is little reason to expect any raising of rates over the next year. The reason is simple: central banks will not tighten until the credit engine is repaired and the economies recover.” It will be easy to tell when central banks eventually do change policy, says Wolf – before they increase rates their first step will be to unwind unconventional measures like quantitative easing.  We agree that there are few signs of an economic revival strong enough to cause interest rates to spike this year.

A revolution in banking

Lionel Barber, Financial Times

Universal “too big to fail” banks, which are generally American or European, “will abandon businesses and locations, through forced disposals or severe cost-cutting”, says Barber. Clients have realised that “combining stolid utility banking and bonus-hungry investment banking under one roof” doesn’t work.  Moreover, “in a world of lower leverage” bankers realise it’s no longer feasible to use “money borrowed on the wholesale markets to invest”. But “from the ruins, a new order will emerge: one with different capital structures, new credit channels and a continued shift in power towards Asian institutions, some of which will be either partly or wholly government-owned.”

Oil price to tank

Byron Wien, Vice Chairman Blackstone

Crude oil will fall to $70 a barrel according to Wien. WTI is currently at $93 a barrel and hasn’t been as low as $70 for almost three years, so it’s quite a call. But Wien thinks politics in America could be the key. He predicts “in a surprise reversal the Democrats sponsor a vigorous program to make the United States independent of Middle East oil imports before 2020. The Administration proposes easing restrictions on hydraulic fracking for oil and gas in less populated areas and allowing more drilling on Federal land.  They see energy production, infrastructure and housing as the key job creators in the 2013 economy.”

China will steadily recover

Nariman Behravesh, IHS Chief Economist

Since 2010 the Chinese economy has slowed significantly, with GDP growth falling below Beijing’s much-trumpeted 8% target to around 7.5%. But Behravesh thinks it will start to pick up in 2013. “There are already signs that growth has bottomed out and that a gradual pickup in momentum is in the offing, says Behravesh. “With the leadership transition now complete, there could even be a little more stimulus in the coming year.” Throw in improving markets in Asia and the US, and you can expect growth of around 8% for China in 2013. We think this maybe a little too optimistic (see below).

The US economy will disappoint

Doug Kass, CNBC

Many pundits are expecting the US to be a bright spot in the global economy. However, Kass thinks it will only grow by 1.5% in 2013. One reason is politics. There will be “no grand bargain, as the debt ceiling and budget issues are kicked down the road.” But there will be plenty of “tortured debate, animosity and fiscal uncertainty”, which hits business and consumer confidence. On top of that “most market participants begin to accept the notion that the Fed is essentially out of bullets and can no longer impact our economy”.

Bond bubble to burst

Peter Schiff, Euro Pacific Capital

Like Schiff, who predicted the last financial crisis, we think that artificially low interest rates have created a bubble in bonds. However, unlike most of his peers Schiff thinks the correction could come as soon as 2013. The fundamental problem, says Schiff in a Forbes interview, is that “we consume more than we produce and we borrow abroad, but we are never going to be able to pay them back.” The ensuing loss of confidence could trigger a corporate bond market panic and sell-off.

Internet TV to take off

Walt Mossberg, Wall Street Journal

“Samsung and others already make TVs that can connect to the internet, and stream internet video and run tablet-type apps”, says Mossberg, but so far they haven’t been widely taken up. 2013 will be the year they are. “Apple, which has been working hard on the problem, will finally unveil its long-rumoured TV this year, with the goal of greatly simplifying the TV and smoothly melding internet and cable content.” This isn’t just about consumer electronics technology, says Mossberg. The most difficult part has proved the “negotiations with media companies for content rights”, but that now looks to be resolved. The result could be a bit of a boost for beleaguered Apple shares.

Stockmarkets to crash

Arch Crawford, Crawford Perspectives

Crawford, formerly a technical analyst at Merrill Lynch, now combines traditional chart analysis with his proprietary ‘astro indicators’. It may sound wacky, but Crawford has predicted a number of market crashes using his slightly offbeat astrological techniques. One warning sign, says Crawford, is the behaviour of solar electrons (particles generated by sunspots). “The highest number of electrons for the longest period of time that I’ve ever seen on record prior to this year was the week of the crash of 1987”, says Crawford in an interview with an Australian finance site. Another danger signal, apparently, is that we have entered “the Mars-Uranus crash portion of the Mars-Uranus cycle”, says Crawford. We are not quite this bearish, nonetheless we do think the exuberance shown by stockmarkets at the start of this year, largely thanks to a last minute fiscal cliff deal in the US, is unlikely to last.

4 Responses

  1. 11/01/2013, Faz wrote

    Interesting intro to the Saxo Bank’s Outrageous Predictions 2013

    “..economically, we already have wartime financial conditions: the debt burden and fiscal deficits of the western world are at levels not seen since the end of World War II. We may not be fighting in the trenches, but we may soon be fighting in the streets. To continue with the current extend-and-pretend policies is to continue to disenfranchise wide swaths of our population – particularly the young – those who will be taking care of us as we are entering our doddering old age …. 1 percent versus the 99 percent, to borrow the most common way to draw the battle lines. Occupy Wall Street was a mere amuse bouche and distant early warning of this phenomenon. The appetisers and main courses will soon arrive if we do not change our ways.”

    At http://www.tradingfloor.com/posts/saxo-banks-outrageous-predictions-2013-extreme-complacency-1677653761

  2. 13/01/2013, Steve P wrote

    Astrology now is it? Ye gods.

  3. 07/04/2013, Dev wrote

    stock market is worse than astrology to say the least. Astrology has more fundamentals going for it than the stock gambling market which is zero science at the maximum. Don’t laugh. Truth is always stranger than fiction folks!!!!!!!

  4. 12/04/2013, Robert wrote

    ARCH CRAWFORD IS WRONG AGAIN !!!

    Once in a while, Arch is right, but even a broken clock is right twice a day.

    Arch has been wrong about a lot of things. Arch was wrong about the “major crash” that would occur in 2010. Now he’s wrong about the crash that was to occur by February/March 2013.

    Come on people, Arch is wrong far more often than he is right !!!

    And for those of you who follow astrology, Arch has Mars square Saturn in his chart. This is indicative of someone operating under a false premise in life. Not that he is false. He does believe what he says. But his thinking is flawed. His predictions are flawed.

    At this point, there are plenty of people out there who have been financially hurt by Arch Crawford’s predictions. It’s time for people to NOT take him seriously anymore.

    He’s lost money for a lot of people. Me included.

Commenting on this article closed

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