Worried about 2017? You aren't alone. Look at any of the lists of newspaper predictions for the year and you will see little but misery. There will be a trade war between the US and China. There will be a real war between the US (or Trump at least) and China, or Russia, or maybe North Korea. The eurozone will implode, prompting both a financial and a political crisis. Brenaissance (AKA Brexit) will backfire at huge cost to the UK economy. Inflation will surge. Overpriced markets will crash.
It's all awful. Unless you ignore the papers and look to the stockmarkets. There nothing particularly awful is happening, or expected to happen, at all. Last year ended just fine for most major markets (the FTSE 100 was up over 14%) and 2017 seems to be starting just fine too: the Nikkei closed up 2.5% in its first day of trading this year, for example.
As John Stepek points out in this week's issue, good investing is all about preparing for things you can't know about rather than just getting ready for things that most people expect to happen. So it is worth looking at the behaviour of the markets after all the events that the commentators announced to be the worst things ever last year (mostly up) and asking yourself this question: what if, instead of being a bloody awful year, 2017 is a bloody brilliant one?
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What if Donald Trump can really do some of the things he says he can do? What if once in office he can reduce tax rates while "eliminating the exemptions and deductions that make the tax code a slush fund for lobbyists and their patrons"? What if he really does reset the American relationship with Russia?
And what if he has a proper bonfire of pointless bureaucracy and regulation? If his fiscal plans can heal some of the wounds of quantitative easing and drive the kind of growth that might spill over to the rest of the world? And what if all that brings us higher real wages as well as higher corporate profits?
The UK could also be pushed into a hard Brexit that turns out to work for us (clearing up uncertainty fast and driving our corporations to innovate) and the eurozone could even hang on for another few years (helped by a whopping monetary stimulus).
All these things are possible and you will need to be as ready for them as you are for disaster (if in doubt, remember that betting against Donald Trump has been a bad idea so far). So hold some gold just in case. But also hold Japan, hold Russia (see Max King's piece in this week's issue), hold small caps (Max again) and don't discount Europe's companies either. Its politics are a mess but as I saw on a recent trip to visit companies in Italy really good firms aren't affected by politics. They just keep trading, exporting and making profits regardless of the nitwittery of their national leaders. A very Happy New Year to all our readers.
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Inflation holds steady at 3.8% ahead of BoE meetingThe rate of inflation did not rise in August, but the Bank of England is still expected to keep interest rates on hold tomorrow
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Thousands of savers with £250k pensions take cash over tax-free money and IHT fearsWith a record £70 billion withdrawn from pensions in the year to March, experts are concerned savers are making knee-jerk decisions without advice that could affect their long term wealth
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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.
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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.
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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.
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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.
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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.
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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”.
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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.
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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.
