Know it is not New Year’s Day when predictions typically come.
Truthfully have been looking for trends and indicators before making up my mind
during a volatile December and January. Here are keys for 2016 and possible
gray swans that could be missed.
1. Global Economy will continue to slow down gradually.
Predictions of end of the world will surround us, but main drivers are a slower
growing China economy and governments will need to reign in spending. Do not
expect China to have a hard landing, and expect several governments will cut
spending slowly over the year as tax receipts are reduced by their economies.
Middle East and Asian countries most affected.
2. US Economy will have a mild recession. The long slow
growth is due for a pullback, but do not foresee a collapse. The US economy
will stabilize the world economy. Stock markets may fall further than the
economy over weaker earnings and short term jolts to expansion plans. We may
already have over 50% of the stock price pullback. Typical recessions stock
losses are 15% to 30%.
3. Commodity prices will stay weak until the global
recession passes. Expect industrial metals like copper & iron stay weak for
a couple years. However most of the price drop has already occurred. Will hurt
Australia, Canada, Russia, and South American countries dependent on mining.
4. Silver is forming a bottom around $14. Moderate chance
could step down a bit more, but likely price will increase by end of year as
mining slows down and supplies get tighter. Gold is trying to form a bottom,
but is more of an emotional investment driven by fear. Could take one more step
down or start another bull market. Consider accumulating both gold and silver
in 2016.
5. Oil should stay weak for now, but expect prices to turn
up a bit in summer to end of year. Expect prices to rebound to $40 to $55 per
barrel by mid-2017 at the latest. Think the cartel will pull together sometime
in the next year. (gray swan)
6. Unemployment will likely stabilize as job growth slows.
Truth is the easy productivity games are ending. Robotization is a
time-consuming investment more likely during growth cycles where payback is
guaranteed. Having participated in both successful and unsuccessful automation
projects, it takes time to develop robots and computer programs. However it is a good investment for your
business during a mild recession to prepare for the next growth spurt.
7. Gray Swans:
ISIS/Daesh - will
weaken in Syria / Iraq under direct pressure. Will grow stronger in Libya and
Africa where non-functioning governments cannot handle the crime.
Europe -
Economy is recovering, but slowed by less demand in Asia. Will struggle with
more immigrants coming and increased nationalistic parties gaining power. Will
see Eastern Europe struggle most, but watch Italy, Belgium, France and Spain
for risk.
European Union - Not likely, but
countries leaving the union would be considered a serious warning for the end
of the Euro.
Terrorism - Expect more attacks on
soft targets like malls, restaurants and hotels.
Computer Hacking will increase in
2016 and become more of international issue.
2016 is setting up as mild year with increasing risks. Also
see there will be pleasant surprises with new technologies, medical treatments,
disruptive companies and areas of growth to offset some of the worries. Stay
positive and looking for opportunities.
