Every day, MoneyWeek's executive editor John Stepek and guest contributors explain how current economic and political developments are affecting the markets and your wealth, and give you pointers on how you can profit.This article is taken from our FREE daily investment email Money Morning.
Happy New Year to one and all.
As my first Money Morning of 2019, this is the one when the crystal ball comes out, I make my predictions and tell you precisely what is going to happen in the year head.
I must say this year I feel like I have even less of a clue than usual. Never mind; that never stopped Mystic Meg. So here goes: ten predictions for 2019.
Disclaimer: I make the predictions as precise as possible in order to increase my chances of being wrong.
This is not investment advice.
My oh-so-very-specific forecasts for 2019
1: Gold: its time has not yet quite arrived
Gold, currently at $1,285 an ounce, has been on a nice little run in the autumn. The run continues into 2019 and it makes it to the $1,360-$1,390 zone, where it runs into resistance. There’s an outside chance we go one stage further and head above $1,450, but for now I’ll say $1,360-$1,390.
There are the trumpets and fanfares: gold is the solution to everything (which, of course, it is), and then it sells off, for which the only possible reason can be manipulation.
The end result is another typical year of range-trading. Slightly better than usual, but nonetheless usual. $1,200-$1,220 is the low. Gold going to the moon has to wait for another year.
2. Brent crude: neither crash nor boom
Oil has been through the mill a bit these last few months, which is a polite way of saying it’s been terrible. Brent now sits at $57 a barrel. In 2019 it goes to $70, but it also touches $45. The usual narratives apply: ”we can’t do without it” (when it goes up); “we’ve got too much” (when it goes down).
3. Sterling: it’s cheap – but…
It’s almost impossible to forecast sterling because it is impossible to know what manner of political witchcraft Theresa May has got up her sleeve and under her hat, if you don’t mind me mixing my metaphors. I remain a sterling bull because it is so significantly undervalued, particularly against the US dollar, but it will not do much while there is so much uncertainty.
Funnily enough, leaving the UK without a withdrawal agreement could be good for sterling, once the initial shock is passed. We will be trading by World Trade Organisation rules, so everyone will know where they stand and there won’t have to be two years of trade negotiations (unless both sides agree to negotiate another deal). In other words, there will be certainty.
Also, to leave without a withdrawal agreement, if done with leadership rather than by accident, could be a bold statement of strength, which would also be good for the currency.
But back to the real world for a second: given what we now have, I will go with a low of $1.22 and a high of, hmm, $1.38. A weak first half of the year, but all starts to come together in the second half. So I’m tempted to say $1.45, but let’s be cautious and say $1.38.
4. Bitcoin: the bear market bottom
2019 is the year in which the bear market in bitcoin ends. That’s not to say it goes to its old highs – we are a few years away from that, at least. But 2019 is the year in which it makes its bear-market low. It makes that low at $1,300. We are in the “trough of disillusionment” phase of the hype cycle.
While the price bottoms out, however, the technology in the sector continues to develop and improve, adoption grows, usability gets more friendly and a lot of the rubbish in the sector gets weeded out, as it runs out of funding.
5. Helium: I mean, it’s bound to go up
Every year some niche commodity seems to become the hot investment in Canada. One year it’s cobalt, another it’s graphite, or potash, or lithium, or rare earth metals. Last year it was marijuana. Vanadium is currently being touted as the new, essential battery metal, but I suspect that’s already yesterday’s story.
I think I might have gone a little too niche with this one, but let’s just say that in 2019 investors take notice of the largely overlooked gas, helium. This strategically important gas has a multitude of uses beyond balloons, most of them in tech. Demand is rising, but 15%-20% of it is met by the US selling off its national reserves. Within two years these will be fully liquidated. Cue the rush to find more.
6. Yen: the peculiar safe haven
It should go to gold, but it doesn’t, it goes to the yen: when panic sets in, that’s where the money goes. But, on a long-term chart against the dollar, there is room for the yen to get a lot stronger. In a volatile year, the US dollar-to-yen ratio goes above parity (ie over 1c to ¥1); or if you prefer, we go from where we are now (around ¥110 to the dollar) to below ¥100 to the dollar.
7. S&P 500: the market will fluctuate
What happens to the stockmarket in 2019? I’ll tell you: it goes a bit higher and a bit lower. There are no new highs, but nor do we get a horrible crash. We end the year higher than where we are now. The S&P 500, currently at 2,560, slips to the 2,150-2,200 area, which marks the low for the year. 2,800ish is the high.
8. UK housing market: expect continued stagnation
More of the same, I’m afraid. Brexit does not bring the relief that many have been hoping for, though some buying does come in afterwards from overseas. Thanks to high stamp duty and the proliferation of overpriced new builds, the top end of the market remains largely stagnant, though there is more activity lower down the pecking order.
9. Brexit: this one will run and run
I think I must have over-gorged on Brexit-media because I can’t see the wood for the trees on this one. That said, I don’t think anyone can.
What the public wants and what MPs want are two very different things, just as they were when the vote itself took place (the public was 52:48, while MPs were more like 30:70). For example, while the majority of Conservative members favour leaving without a withdrawal agreement, the majority of their MPs do not.
As for the prime minister, I suspect she is too controlling to allow such a scenario. On the other hand, 29 March approaches, and it does not look like her deal will make it through Parliament. So the only other alternatives appear to be to delay Article 50 or go for a second referendum.
My suspicion is that clandestine negotiations with the EU will have been taking place, so that, with a bit of scaremongering nearer the time, some modified version of her deal will get through. That’s not an outcome I would like, but there you go.
On the other hand, Parliament is so extraordinarily divided, that I can’t see it ratifying anything. Which makes some form of accidental no deal more likely.
In the end I decided to put it to a vote on Twitter. That was as inconclusive as what I’ve just written here.
Right. Waffle over. I’m going for Article 50 gets delayed.
10. And, finally, your Brucey-bonus sports prediction
Manchester City win the league, Liverpool choke somehow. Huddersfield, Fulham and Cardiff all go down.
So there you go: ten predictions for 2019.
A reminder of the scoring system: I get two points for a hit, one for a near miss, zero for a miss and minus one for an “epic fail”.
Am I woefully wrong? Tell me on Twitter.
I’ll mark myself in the final Money Morning of the year.
In the meantime, have a great 2019. I hope you make boatloads of wonga.