I hate making predictions.
I got the tech wreck and sub-prime right, but was far too early on those predictions. Importantly, the predictions below could most certainly be wrong. We live in a highly complex world. We can measure instability, we can score up risk but we can’t precisely know timing.The clear risk to me today is in the bond market.
- U.S. stocks will remain in an uptrend fueled by a strong dollar.
- Tax cuts, infrastructure spending and $2 trillion in tax repatriation will drive capital flows to the U.S.
- The European sovereign debt crisis will be the first major crack to crack. Unmanageable debt in Portugal, Italy, Greece and Spain. Include France and Germany in their dysfunctional union. Confidence in government/political leadership is lost.
- The European banks sit on the fault line. Watch the banks. Hope so… Not so sure.
- The smart money races out of EU banks to U.S. dollars and U.S. assets.
- In China, debt too is the major concern. Ghost cities lacking rental income will prove unable to support the structured debt that financed the construction. Defaults mount.
- Drastic measures are put in place to prevent the flow out capital to the U.S.
- Gates, tariffs, currency wars escalate – trade wars escalate.
- Loss of confidence in government here, there and most everywhere.
- Global and U.S. inflation become a major concern as global growth remains well below the average of the last six post-recession expansions. Click here for a great chart.
- Stagflation returns. Low growth/high inflation. Interest rates move higher with the 10-year touching 3% this year and 6% within a few short years.
- The great bond bull market is over. Bond investors lose money.
