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.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
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.
-
Divorced? Simple rules to stop your ex claiming inheritance on your estateDivorces are back at pre-pandemic levels leaving lawyers urging separated couples to get their affairs watertight to avoid any nasty disputes after death
-
Is now a good time to invest in Europe?European stocks are undervalued, but experts believe that defence and infrastructure spending could see renewed growth
-
Inflation may be slipping but there is still plenty of misery aheadEditor's letter Inflation may be a little lower than last month as the prices of petrol and diesel fall back, but it remains structural and long-term, says Merryn Somerset Webb. And there are no painless solutions.
-
Beat the cost of living crisis – go on holidayEditor's letter As inflation rages, energy bills soar and the pound tanks, what’s a good way to save money this winter? Go on holiday, says Merryn Somerset Webb.
-
How to tackle rising inflation and falling stockmarketsEditor's letter Inflation is rising around the world. Even though inflation is widely expected to return to around 3.5% next year, it is still wreaking havoc. Merryn Somerset-Webb explains what to do about it.
-
How capitalism has been undermined by poor governanceEditor's letter Capitalism’s “ruthless efficiency” has been undermined by poor governance, a lack of competition and central banks’ over-enthusiastic money printing, says Andrew Van Sickle.
-
Don't be scared by economic forecastingEditor's letter The Bank of England warned last week the UK will tip into recession this year. But predictions about stockmarkets, earnings or macroeconomic trends can be safely ignored, says Andrew Van Sickle.
-
The biggest change in the last 17 years – the death of the “Greenspan put”Editor's letter Since I joined MoneyWeek 17 years ago, says John Stepek, we’ve seen a global financial crisis, a eurozone sovereign debt crisis , several Chinese growth scares, a global pandemic, and a land war in Europe. But the biggest change is the death of the “Greenspan put”.
-
The wolf returns to the eurozone’s doorEditor's letter The eurozone’s intrinsic flaws have been exposed again as investors’ fears about Italy’s ability to pay its debt sends bond yields soaring.
-
Things won't just return to normal – that's not how inflation worksEditor's letter You might think that, if inflation is indeed “transitory”, we just need to wait and everything will return to “normal”. But this is a grave misunderstanding of how inflation works, says John Stepek.
