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My big investment calls for 2017
Dominic Frisby takes out his crystal ball and makes 12 predictions for the coming year for investments and the economy – plus one bonus call.
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Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
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Gosh, I get a lot wrong. But I also get a lot right. And if you look at my record over the years, it's considerably better than any other forecasting body, be it the International Monetary Fund, the Bank of England, the US Federal Reserve, or some hobo in a broadsheet.
When I make a howler and I often do (sterling last year was my biggest) I'm happy to put my hand up and admit the mistake, because I'm going through a pain far worse than being wrong: I'm losing money.
After 2016, there is a lot of head scratching going on as to how "professional" forecasters are so badly wrong so often. The cure is simple. Here is my strategy to improve the forecasting profession beyond recognition: those who forecast must also speculate their own capital.
If forecasters had to put their money where their mouths are, rather than keep their paymasters happy with what they predict, being wrong would cost them money. You might find that the predictions would get rather better.
Right, rant over.
The scoring system is simple. I get two points for a hit, one for a near miss, zero for a miss, and minus one for an "epic fail".
For the sake of entertainment, I try to make my predictions quite specific, which makes the likelihood of being wrong all the more probable.
First, some broad brush strokes.
After the zinger that was 2016, you can't help thinking that 2017 will be more of a plodder. There aren't, for example, two huge votes scheduled of the magnitude of Brexit or the US elections, so any change might more incremental and gradual than sudden.
But the same currents that brought those results are still flowing indeed, if anything, they are gathering momentum.
The first is this huge dissatisfaction with the political class, with the so-called establishment and its ways of doing things.
The "anti-establishment" won two major victories in 2016 first Brexit, then Trump but you can't expect the establishment to roll over and die. It will fight back.
It will try to disrupt Brexit with legal processes, bureaucracy and noise. Trump will meet with similar opposition with every step he takes. So, in 2017, this struggle will get more attritional.
The next big establishment figurehead teetering over the dustbin of history is Angela Merkel. I don't know enough about German politics to make a prediction, but it seems, thanks to the German electoral system, she will be harder to topple.
As for Trump, I expect that will be neither as good as his supporters hope, nor as bad as his detractors fear.
The second, equally enormous current, is the disruption of existing practices because of new technology. Transport will continue to be "disrupted" by the likes of Uber and driverless cars. Education, in its current form, will be made to look more and more pointless by the internet. Data-driven healthcare will do something similar to the service offered by the state.
State broadcasters will be made to look more and more antiquated by those online. Robots will replace workers not just blue collar but white collar too which will continue to boost the idea of universal basic income. There will be a shift in manufacturing from Asia back to the west, but it will be Western robots, not Western labourers, that do the work.
Again, this process is incremental. There will not be a moment where everything changes. But looking back over the course of a year or three, the amount that has changed will be considerable.
Right, onto the nitty gritty.
The 12 big predictions plus your sporting bonus
1. Q1: the contrarian rally
The first quarter sees a rally in gold and US government bonds and a fall in stocks. The last days of 2016 saw Barron's declare "The End of a Golden Era", while the Financial Times ran a headline "Gold: For Whom the Bell Tolls".
Meanwhile, I've never seen so much press declaring that the 35-year bull market in US government bonds is over (and it may well be, by the way, but it isn't going to roll over lightly), while the US media is wetting itself over the Dow hitting 20,000. When the press gets this extreme, it's time to take the other side of the bet.
Gold is loathed, bonds are loathed, stocks are loved. So in Q1 gold will stage a rally, bonds will stage a rally and stocks will sell off.
2. New highs for bitcoin
When it comes to bitcoin, we're on the "slope of awareness" phase of the hype cycle. It's a bull market. The prediction: in 2017 bitcoin breaks out to all-time highs. The value of a bitcoin exceeds the value of an ounce of gold.
In 2017 the Dow will not fall below 17,000 (actually, I see 18,000 as the low, but I'm giving myself some leeway). The high will be over 22,000.
5. Uranium
Uranium hit 13-year lows last month, at $18 a pound. The current price is $20. Good news: the bear market is over. In 2017 we will see $30 uranium: the price rises more than 50%.
6. Brexit
Despite the best efforts of those who would oppose it, Article 50 is triggered somehow. Nobody really knows what they're doing, but we muddle through.
7. The pound vs US dollar
The current price is $1.22. In 2017, it goes above $1.30, but it also flirts with $1.05.
8. Gold
$1,050 an ounce or thereabouts is the low; the high is close to $1,300. I make that call, by the way, with zero confidence.
9. Trade wars
Whether through some kind of EU sulking the EU does not want to set a precedent by cutting the UK any sort of deal or some kind of falling out between Donald Trump and China, I can see the theme of trade wars making an unwelcome return in 2017.
I'm not predicting a full-on trade war it would take a lot to get there maybe "trade tantrums" is a better description.
10. Interest rates
Any rise in UK interest rates will be tiny. The pace in any rises will be glacial. It wouldn't surprise me if 0.25% is the new 0.5%.
11. UK house prices
I'm tempted to go all-out bear on this one, but I'll hedge and say current trends continue. Top-end London property continues to stagnate and slide, while mid-range stuff holds up better, so that overall London is only slightly down on the year say 3%. The rest of the UK rises by a few per cent.
12. Crude oil
Brent crude oil goes to $67 a barrel, and maybe higher. It doesn't go below $45.
13. Your bonus sport prediction
You normally get a bonus sport prediction, but the Premier League looks done and dusted to me. Chelsea win the league. Swansea, Hull and Sunderland go down. The only bit I'm not sure about is Sunderland. So let's say Watford go down to make it a bit more interesting.
There you go 13 predictions for 2017. In the final Money Morning of the year, I'll get out the marker pen.
In the meantime, may I wish you all the very best for 2017. May it be a belter.
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