2019 Economic/Political/Market Landscape

In order to think about the 2019 Landscape, maybe a review of our 2018 Economic Surprises would be in order. So here we are:

With all the Wall Street Guru’s putting out their potential surprises for 2018, I am thinking why not do this myself, there is enough craziness in the mix to allow a little more mixing to provide some outside the box probabilities.

We have discussed at length the fact the we have seen 17 years where Washington has tried multiple attempts to provide solid real economic growth and yet all the results are just face saving bluster created out of artificial money.

These surprises are kind of built around a premise that no one would agree with them so in a crazy time they have a decent probability of occurring.

The actuality to the 2018 intro above is shown in bold print today.

  1. In a 2018 + vein, over the next three years look for fed fund rates to trade over 30 year bond rates by at lease a point. And the actual, well we still have 2 years left on this forecast, but the yield curve has been flattening and we stick with the longer term call.
  2. This is the beginning of the end of the dominating influence of Saudi Arabia in world events. It is a desert, people.  Here we seem to be on topic and this will continue to unfold.
  3. With that said, look for oil to start a 3 year slide to under $ 10 a barrel in 2020.  The bounce from the 2016 lows has been a god send for them but it is history.  Again, this outlook seems to be on target, albeit with various OPEC induced bounces.
  4. Brexit will be rescinded one way or another.  We still like this call, as the political turbulence continues to unfold.
  5. The Euro has the potential to scream higher with Britain in place and oil prices dropping.  We blew this one for the moment, probably way to early on this call, but if Brexit fails the other pieces are in place, ie, declining Oil and the US stock markets, the 97 level on DXY, that we identified a long time ago, is a big resistance level.
  6. The Yen is at the core of the world stupidity bubble, may even replace the Bernanke QE stupidity bubble.  What will Abe do with all this crap they own?  You will probably see the yen scream upwards as this unwinds.  This forecast is probably irrelevant to the bigger Global issues.  The 2011 Yen Highs are out there as a high water mark, and the 1999, 2004, and 2016 highs are still formidable obstacles, but the recent rally shows the risk.
  7. The dollar will plummet as the US 2017 Corporate Tax Change based inventory buildup unwinds and trade issues multiply and US status deteriorates.  Here I was off the mark on timing as the Trump Tax cuts provided more of a bubble than anticipated and delayed this forecast.
  8. Stocks will run into a headwind as all this rolls out.  I would not attempt to talk about how low is low.  Again, the market held up longer than expected but the Macro’s fell into place in October 2018.
  9. And lastly, Gold by default will go back to haven status, heading to new all time highs over the next three years.  This forecast is on track.

 

Later this week we will elaborate more on 2019 expectations.

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