Coming in 2016

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.