I took part in a roundtable with a lot of important people (fund managers mostly) late last year. At one point I suggested that the US was just about due a recession. Nonsense, they all said. The US is on a roll and just because it is due a recession time-wise (the current expansion has lasted 80 quarters) doesn't mean it will get one.
I didn't argue much. That would have been like trying to explain to Gordon Brown that he hadn't abolished boom and bust, just before the market explained it to him rather better. But a look at one of the first numbers out for 2016 suggests that the idea that a US recession is not far off is not nonsense at all. The ISM manufacturing index in America has fallen to 48.2. That suggests, as Capital Economics puts it, that the "manufacturing sector is dangerously close to recession". That matters largely because of the implications it has for the ongoing global currency wars.
The strong dollar everyone expects to see in 2016 relies on America remaining strong enough for the Fed to maintain its programme of gradual interest-rate normalisation. If it has to re-enter the currency wars (loosening policy instead) just as China is trying to weaken the renminbi, and the European Central Bank tries to keep the euro weak, what happens? There's more on this in the markets,and James Ferguson addresses it too(he's a believer in dollar strength). But the key point is this: the global economy remains remarkably fragile, and hence unpleasantly unpredictable.
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That makes investing look hard particularly given how weak economies seem to send modern central bankers mad. But in truth, if you are investing for the long term, there is plenty out there in 2106. Rupert Foster explains why you really need to be invested in China and why Vietnam is the "most exciting long-term investment in Asia". Tim Price tells us that Japan is "awash" with the kind of cheap stocks MoneyWeek readers love. Charlie Morris and Dominic Frisby come out as Bitcoin bulls. James tells you that house prices outside London and its commuter belt are finally cheap (it's taken him a while to agree with me on this) and Bengt offers up an interesting lithium explorer as his New Year pick.
For a few investment trusts to buy that reflect some of these themes, turn to page 20 for David Stevenson's picks. A few of his favourites are also in the gratifyingly well-performing MoneyWeek investment trust portfolio, but some of the others are rather more niche (my favourite being Riverstone Energy). Most analysts expect a flattish year for markets this year. They may be right although they rarely are. But whether markets as whole rise or fall, we reckon 2016 is going to be year full of opportunity for those who know where to look. Happy New Year.
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