By Craig Harewood
Investment Director at OurInterest Inc.
From the pleasant predictions of economic prosperity for emerging economies to the grim predictions of regional conflict and the next world war, we all love predictions. We also love to look back and contemplate where we went wrong or right with those predictions.
Every year, companies and individuals make predictions for the year ahead and 2016 isn’t much different. Here are the predictions for 2016 from the world’s biggest banks, the italicized commentary are those of yours truly. Without further ado, some interesting economic predictions for this year (almost typed 2015) are as follows:
1. The USA stock market will end almost where it started ~ Goldman Sachs.
2. HSBC expects a weaker US dollar against other major currencies.
This would be welcome news for Barbados if it plays out in GBP:USD, which is at five-year lows. Theoretically British tourists will have more money to spend with a stronger pound. Also my preliminary research shows that British tourist arrivals are highly correlated with percentage changes in the pound.
3. Citi Bank predicts a weaker Chinese yuan as the People’s Bank of China (PBOC) depreciates the yuan.
4. Barbara Byrne at Barclays Capital: “We’re beginning to see sovereign wealth funds decline – Norway, Saudi Arabia. I think we’ll see a reversal on that; countries will not be able to afford fluctuations in their reserves. We’ll probably move to a more stable oil price, which I would say is $60 per barrel.”
Disagree on the catalyst but I do agree that oil will recover a bit in 2016.
5. Scotiabank sees gold averaging $1,090 an ounce for the year. Likewise, most of the big banks see depressed gold prices for 2016.
Although I am a massive gold bear, I disagree on geopolitical concern. Time to close those sell gold positions for now.
Here are my firm’s top macro predictions for 2016:
1. Global stock markets will struggle again this year with the catalyst being sub-prime debt encouraged by USA’s quantitative easing. We anticipate losses.
2. Oil will bottom in 2016; my prediction for this happening between April and August but markets may start to price it in sooner.
3. The Bitcoin community and price will struggle this year as concerns mount on the slow adoption of the technology and as the community begins to realize the reason why the big banks may appreciate the technology but not the mechanism to access the technology i.e. Bitcoins and their associated price volatility. In addition there is the unknown of when will Bitcoin’s founder, often referenced by his pseudonym as Satoshi Nakamoto, sell his stash of Bitcoins (he has the largest hoard of Bitcoins in the world).
4. On a regional level and certainly not a trade worth taking; if Jamaica’s government and private sector can continue to persuade investors into the private sector then Jamaica’s currency could actually appreciate in the near term. It is unlikely that bond investors have any appetite for Jamaica’s government debt so this scenario can only play out via the private sector.
5. If I may cheat a bit, Middle East tensions will continue (this has already happened since Saudi Arabia ended diplomatic relations over the weekend and at the time of this writing).
I hope you enjoyed, let me know what your predictions are for 2016.
Craig Harewood is the investment director at OurInterest Inc. This article is intended to be general in nature, and is not meant to give specific investment advice to any individual. The author does not accept any liability for investment deals made or any action taken as a result of reading this article. The opinions, which are subject to change, are those of the author and not of any company within the OurInterest Group.