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.
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.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, soit'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.
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