‘2017 financial market risks? I smell opportunities…’

Chris Bailey
Getty

‘Opportunities are like sunrises. If you wait too long, you miss them’ – William Arthur Ward

Happy New Year…that is unless you are an investment or political risk strategist in which case the dawning of 2017 should be dubbed an ‘Unhappy New Year’.

The average stock market investor is probably scratching their head about all of this with the FTSE 100 and various US indices kicking around all-time highs and stock markets in Europe moving into a bull market zone twenty percent plus above previous lows.  However there is a tradition of august commentators unveiling learned reports at face value anticipating doom, gloom and near financial apocalypse.

Typically by the end of the year they are wrong and the same will be the case in 2017.  Let’s take the top three gloomy scenarios and explain why this is the case.

Scenario #1 – the debate around Brexit nobbles the UK economy and the European Union moves ever-closer to a break-up.  Suffice to say the Pound and the euro will be deeper in the currency trash can…

Like or loathe everything around European trade and co-operation the practical reality is that we are in serious ‘muddle-through’ territory at the moment.  The ripping-up of existing trade relations is a massive lose-lose for everyone and hence even with Article 50 we can look forward to another year of Brexit delay.

[graphiq id=”lJcuG9FcUzX” title=”YouGov Poll: The Economy Post-Brexit” width=”600″ height=”516″ url=”https://w.graphiq.com/w/lJcuG9FcUzX” link=”https://www.graphiq.com” link_text=”InsideGov | Graphiq” ]

Meanwhile policy stimulus continues and as the early January Purchasing Managers Index economic data both sides of the English Channel has already showed a bit of momentum is apparent – funny what happens when you slash interest rates and related.

Meanwhile neither the France nor the Netherlands will have populist leaders, Italy has too many debts to do anything but stay in the European Union and Mrs Merkel will cap the year off by being re-elected in Germany.

All of this means that those global investors who surveys have shown have placed respectively the Pound, UK assets and the euro as their top three most underweight investments are going to have to eat a bit of humble pie and buy back in.  That pushes the Pound and euro up.

Scenario #2 – President-elect Trump goes isolationist and protectionist.  Global doom follows.

At one level I am still amazed that he won but the key for understanding ‘The Donald’s’ political and economic strategy post 20 January is to look at his business dealings over the last generation or so.

The current crop of proxy government by Tweet smacks of the same use of provocative headline business statements…and then a practical rowing back to do the deal.  Of course this feels grubby to political commentators who have been schooled in ‘a proper way to do things’ as shooting from the hip belongs more to the era of the Wild West.

Donald Trump

The reality is that Trump talks big but carries a little stick and this is because a good chunk of US debt is owned and bought by the Japanese and the Chinese.  Now the former will play ball but the latter…are a group of pragmatists too.

Whilst all the talk today may be of closer personal relations with Vladimir Putin of Russia in four years time all the chat will be about a realist, rumbustious relationship with China.  They buy the debt in exchange for the dollar not being too strong…which also aids Trump’s biggest political thrust: more jobs in America.

Scenario #3 – China catches a cold.  The world catches something far worse.

I have a rule of thumb that if I am going to criticise the economic backdrop in a country…then I need to have visited there first.  Today’s ‘internet research’ induces a different range of responses though and – once again – fear levels about China are at fever pitch.

Above I discussed the reality of a pragmatic Donald Trump doing deals with the Chinese and hence all those fears about a crippling Chinese exchange rate devaluation cascading through the emerging markets and global trade can quietly go away.

Chinas Präsident Xi Jinping hat dem künftigen US-Präsidenten Donald Trump zum Wahlsieg gratuliert. Er bot dem Republikaner eine enge Zusammenarbeit an in der Hoffnung, die Beziehungen zwischen China und den USA stärken zu können, wie die staatliche Nachrichtenagentur Xinhua am Mittwoch berichtete. (Quelle und Bild: dpa)

Meanwhile on-the-ground efforts by the Chinese authorities to enact critical added flexibility inducing reforms continue apace…and it is in these areas that everyone should be looking.  My judgement is that initiatives here are far more impressive in terms of change than anything currently be enacted in the Western world and that bodes well for a continuing shift of the Chinese economy to a more consumer oriented focus – which is good for the rest of us.

Now I am no wide-eyed perma-optimist as there are plenty of expensive shares out there already but applying the above and buying the Pound and the euro, domestic plays in the UK and on the Continent and keeping up your emerging market weighting I believe will make you money in 2017.  Especially if you do it when others are fearful…and you are greedy.

So, Happy New Year.

Chris Bailey has 20 years of investment industry experience at long-only and long-short institutions as a global multi-asset fund manager, strategist/macro thinker and, in the earlier part of his career, as a securities and fund analyst.

In 2013 he founded Financial Orbit focusing on daily macroeconomic comment and securities analysis. In December 2016 his Twitter account (@financial_orbit) was named as one of the ’50 accounts investors should follow in 2017’. 

The content on this page does not constitute financial advice and is provided for general information purposes only.  Nothing on this page should be regarded as an offer to conduct investment business or to buy/sell any investment

 

 

  • Another British airline in trouble: Flybe shares plunge 19% after profit warning
    News
    Business Insider UK

    Another British airline in trouble: Flybe shares plunge 19% after profit warning

    Flybe has become the latest carrier in Britain's stricken airline sector to hit trouble after issuing a profit warning to investors on Wednesday. In a statement to the markets, Flybe — Britain's third largest airline behind easyJet and British Airways — said that its profits for the first half of the 2017/18 financial year are now expected to be between £5 million and £10 million, a downward revision from a forecast of £15.9 million. "While half-year profits are lower than expected, I am confident that we are still on a clear sustainable path to profitability in line with our stated plan," Flybe CEO Christine Ourmieres-Widener said in a statement alongside the announcement.

  • Health experts issue warning over Saharan dust in the UK air
    News
    Yahoo News UK

    Health experts issue warning over Saharan dust in the UK air

    Asthma sufferers have been warned to carry their inhalers.

  • EU leaders voice frustration on UK Brexit position, money
    News
    AFP

    EU leaders voice frustration on UK Brexit position, money

    Britain must be more "realistic", the EU says

  • Amazon Studios chief Roy Price resigns amid Harvey Weinstein claims
    News
    Sky News

    Amazon Studios chief Roy Price resigns amid Harvey Weinstein claims

    Amazon Studios head Roy Price has resigned amid claims he dismissed allegations Harvey Weinstein raped actress Rose McGowan. In a series of Twitter posts last week, McGowan claimed she told Price "over and over" about the alleged rape, only to be informed it "hadn't been proven". McGowan added that Amazon Studios "called to say my show was dead" after she asked it "to do the right thing" over a tie-up with The Weinstein Company.

  • Brexiteers accused of 'bullying' the EU as commissioner warns hard Brexit cliff edge is 'so close we can see the drop'
    News
    The Telegraph

    Brexiteers accused of 'bullying' the EU as commissioner warns hard Brexit cliff edge is 'so close we can see the drop'

    Brexiteers accused of 'bullying' the EU as commissioner warns hard Brexit cliff edge is 'so close we can see the drop'

  • Theresa May rules out pause in introducing universal credit
    News
    The Guardian

    Theresa May rules out pause in introducing universal credit

    Labour inflicted a symbolic defeat on the government over universal credit on Wednesday night, hours after work and pensions secretary David Gauke announced he would end a 55p-a-minute helpline for welfare claimants. Up to two dozen Conservative MPs had said they may support a Labour motion, which called for ministers to “pause and fix” the controversial welfare reform, which the government whipped its MPs to abstain on.

  • News
    Reuters

    Guilty verdict in Boston Islamic State beheading plot

    A Boston-area man was found guilty on Wednesday of conspiracy to commit acts of international terrorism and supporting Islamic State for a 2015 plot to attack police and behead a conservative blogger who organised a "Draw Mohammed" contest. David Wright, 28, was found guilty of five criminal charges for planning with his uncle and a friend to behead blogger Pamela Geller. The plot fell apart after Wright's uncle said he wanted to kill law enforcement officers instead and was shot dead by police.

  • Barca banner calls for 'dialogue and respect' amid crisis
    News
    Reuters

    Barca banner calls for 'dialogue and respect' amid crisis

    Barcelona unveiled a huge banner reading "Dialogue, Respect and Sport" before kick-off against Olympiakos at the Nou Camp on Wednesday, calling for a resolution to the political crisis between Catalonia and the Spanish central government. The Champions League game against the Greek side was the first at the Nou Camp since the La Liga clash with Las Palmas on Oct. 1 which was played behind closed doors in what the club said was a protest at police crackdowns on the banned referendum on independence in the region that day. "This is the same message that was transmitted by Barcelona president Josep Maria Bartomeu on Oct. 5, which called for a process of dialogue and negotiations to find solutions to the current political situation in Catalonia," Barcelona said in a statement.

  • China's President Xi says will continue years-long war on smog
    News
    Business Insider UK

    China's President Xi says will continue years-long war on smog

    China will keep up its years-long battle against smog to ensure "blue skies" and promote a "revolution" in clean energy, President Xi Jinping said on Wednesday at the opening ceremony of a key Communist Party congress. China has ordered factories to cut output in a bid to enforce bigger emission cuts in coming months and avoid a repeat of the near-record levels of choking smog that enveloped key northern areas at the start of the year. In the long term, it has also launched a series of measures to curb the use of coal, the nation's favorite fuel, and boost use of renewable power, like wind and solar.

  • Bidding war heats up for $5 billion second Amazon HQ
    News
    AFP

    Bidding war heats up for $5 billion second Amazon HQ

    Metropolises across the United States are locked in a frenzied bidding war desperate to woo Amazon into favoring them as the site of the e-commerce giant's second headquarters

  • Gaming giant Crown faces misconduct claims in Australia
    News
    AFP

    Gaming giant Crown faces misconduct claims in Australia

    Crown is accused of rigging machines to work in its favour while the whistleblowers also said staff were encouraged to use different ID cards for certain transactions to avoid the scrutiny of Australia's ...

  • News
    Business Insider UK

    US looking to Japan for help in boosting LNG exports to Asia

    A top Department of Energy official says the U.S. is keen to work with Japan in expanding exports of U.S. liquefied natural gas in Asia. Japan's trade and industry minister announced Wednesday plans for a $10 billion public-private effort to build LNG terminals, power plants and other facilities to help meet rising energy demand in the region. U.S. Deputy Energy Secretary Dan Brouillette, who is visiting Tokyo, described that plan as "fantastic." He told reporters he also hopes for more investment by Japan in U.S. LNG facilities.

  • News
    Business Insider UK

    Hayward breaks ankle, Cavs hold off Celtics 102-99 in opener

    CLEVELAND (AP) — Boston's Gordon Hayward broke his left ankle just five minutes into the season, a grisly injury that overshadowed Kyrie Irving's return to Cleveland and the Cavaliers' 102-99 win over the shocked Celtics on Tuesday night.

  • Rohingya man refugee again 40 years after leaving Bangladesh
    News
    AFP

    Rohingya man refugee again 40 years after leaving Bangladesh

    Nearly four decades ago Fazol Ahmed returned to his native Myanmar with his family under a Rohingya repatriation scheme. Now he is back in the teeming camps of Bangladesh with his wife and children, a refugee once again.

  • Bake Off viewers are FUMING after fan-favourite is kicked off the show
    Entertainment news

    Bake Off viewers are FUMING after fan-favourite is kicked off the show

    Who failed to impress the judges in Forgotten British Bakes week?

  • News
    Business Insider UK

    EU-U.S. data transfer pact to pass first annual review

    A year-old pact underpinning billions of dollars of transatlantic data transfers will get the green light from the European Union on Wednesday after the first review to ensure Washington protects Europeans' data stored on U.S. servers. The EU-U.S. Privacy Shield was agreed last year after everyday cross-border data transfers were plunged into limbo when the EU's top court struck down a previous data transfer pact in 2015 because it allowed U.S. spies excessive access to people's data.

  • News
    Business Insider UK

    North Korea says it plans to launch many more satellites

    North Korea's deputy U.N. ambassador said Tuesday the country plans to launch many more satellites and accused the United States of trying to block its efforts to help peacefully develop outer space. As a party to several space treaties, North Korea's space development activities are "all ground on legal basis in all aspects," Kim said.

  • Tory MP Tim Loughton spends an hour in the bath every morning 'just thinking about things'
    News
    Evening Standard

    Tory MP Tim Loughton spends an hour in the bath every morning 'just thinking about things'

    A Tory MP has revealed he begins each day with an hour long session in the bath “just thinking about things”. Tim Loughton, MP for East Worthing, said he opts for a bath because the shower is “one of the greatest causes of stress”, the Times reported. Mr Loughton, who has been an MP since 1997, is the co-chairman of the all-party Parliamentary group on mindfulness.

  • Mining giant Rio Tinto, two ex-chiefs charged with fraud
    News
    AFP

    Mining giant Rio Tinto, two ex-chiefs charged with fraud

    Rio Tinto, the world's second biggest miner, has denied allegations of fraud made by US regulators

  • News
    Business Insider UK

    Twitter vows new crackdown on hateful, abusive tweets

    Twitter vowed to crack down further on hate speech and sexual harassment, days after CEO Jack Dorsey said in a tweet-storm that the company was "still" not doing enough to protect its users. The policy changes were specifically aimed at protecting women who unknowingly or unwillingly had nude pictures of themselves distributed online or were subject to unwanted sexual advances. In an email Twitter shared with The Associated Press Tuesday, Twitter's head of safety policy outlined the new guidelines to the company's Trust and Safety Council, a group of outside organizations that advises the company on its policies against abuse.

  • News
    Business Insider UK

    PRESS DIGEST - Wall Street Journal - Oct 18 (RIO, RIO)

    Oct 18 (Reuters) - The following are the top stories in theWall Street Journal. Reuters has not verified these stories anddoes not vouch for their accuracy.

  • Country Life tells Mary Berry: the dining room is not dead 
    News
    The Telegraph

    Country Life tells Mary Berry: the dining room is not dead 

    Country Life tells Mary Berry: the dining room is not dead 

  • Singaporean newspaper under fire over Muslim cleric's column that suggested beating 'stubborn wives'
    News
    The Telegraph

    Singaporean newspaper under fire over Muslim cleric's column that suggested beating 'stubborn wives'

    Singaporean newspaper under fire over Muslim cleric's column that suggested beating 'stubborn wives'

  • The most elite dating clubs for young professionals in London and New York, ranked by price
    News
    Business Insider UK

    The most elite dating clubs for young professionals in London and New York, ranked by price

    Elite dating apps are growing in popularity and physical clubs are expanding their international presence. Perks include free drinks and access to exclusive events. Elite dating apps have well and truly caught on among young professionals worldwide.

  • Hard Truths About Psych Drugs: What I Learned, Eventually, From My Mother’s Death in a Psych Ward
    News
    Newsweek

    Hard Truths About Psych Drugs: What I Learned, Eventually, From My Mother’s Death in a Psych Ward

    It took me well over a decade to realize that my mother's 1995 accidental death inside the psych ward of a well-respected Long Island hospital may have been due, in large part, to overmedication. My mother, suffering from some sort of deep depression marked by delusions, fell out of her bed at night onto a hard floor, cracked her skull and went into a coma from which she never recovered. Although my recent request for her medical records is still caught in a bureaucratic limbo, it's reasonable to assume that like other patients of the day, she was prescribed a mixture of a first-generation antipsychotic such as Thorazine, the newer antidepressant Prozac and other sedating drugs to calm the lonely terrors inside a hospital unit for crazy people.

By using Yahoo you agree that Yahoo and partners may use Cookies for personalisation and other purposes