So another year is nearly over and what a year it has been for both markets and the geopolitical landscape.
Numbers wise, on the surface a year of the US$ and US equities, once again. As always we must look hard at the numbers and view them across currencies to see their relative performance. Here therefore, a quick run through of the major asset classes, with a week to go.
Dow & Sp500 +12% (In euros +16% & inc divis +18.5%)
Nasdaq +6%
US$ Gold +6%
Euro Gold +10%
Nik225 +2% (+5% in US$ note)
HSI -5% (Pretty even in Euros due to dollar peg)
Dax +4% (Zero in US$)
Ftse100 +12% (-6% in US$)
Dollar index +4%
Copper +16%
Bitcoin (US$) +100%
Its pretty clear what the alpha investment has been this year. The new digital currency has seen a strong bid from mid year onward. Copper and some other commodities have also seen a renaissance year. So 2016 saw a digital currency and commodities as the alpha performers and this was in a year when the dollar rose. This is a highly unusual and noteworthy therefore.
For my own book, I have eventually turned in +12% performance, in euros. Like Fitzpatrick below I would say i scored a “B”. I have the problem of spreading assets quite widely to mitigate risk. To mitigate risk in this way reduces my ability to really change the book emphasis as quickly as i would like sometimes. On the positive side the spread of assets across sectors and countries is a natural hedge lowering volatility and risk. On this basis a +12% is pretty impressive. The most disappointing of asset classes this year is undoubtedly gold which is under performed her positively correlated sister asset classes.
Gold deserves a separate discussion but we must remember gold is highly correlated to inflation and real interest rates. For the moment the market consensus appears to be buying a benign inflation and narrowing of real interest rates.
Judging the macro is never an easy task, hence we are technical traders here, but if I deeply believe the market is mis pricing this and that inflation is set to increase sharply and real interest rates will go more deeply into negative territory. We are paid on price and until inflation shows herself more clearly and therefore real negative interest rates widen I must accept the bullion asset class performance is likely to remain disappointing.
Below please find a number of 2017 forecasts from the major investment houses. I wont comment individually on them but only to say the technical setup remains strong here for many equity sectors and indexes. I intent to release another technical report end of the calendar year with sector charts and technical indicator charts etc as an accompaniment to the UBS 2017 Year Ahead release.
Here some reports:
Lets start with Citi Bank’s technical guru, Fitzpatrick who has scored a pretty impressive run this year.
And here GS
And here UBS Asset Management (The Technical Equities Team’s annual forecast in a week’s time).
And here CS
and here Nikko Am
20161216-global-multi-asset-market-outlook-2017
and here Deutsche bank
And here Double line
And here an excellent tech forecast report from Nautilus
And here HSBC’s forward
hsbc-global-asset-management-outlook17
And here JPM
And here RBC
rbc-2017-outlook-the-trump-playbook
And here Standard Chartered
And here a chart retrospective look at 2016 by WF
And here a look ahead from WF
wf-2017-annual-economic-outlook-report
And here Yardeni
Hoping you all scored a good year and that the reports and comments provided here assisted you.
This is the first Christmas I will enjoy with my daughter who is now 9 months old. We are in the mountains of Andorra awaiting more snow. Without wishing to be cliche I do believe those of us lucky enough to understand the terminology and workings of finance have an obligation to remind to those around us just what created our prosperity & welfare. The ECB yesterday released a survey once again illustrating how quickly Europe is losing her ability to create wealth and prosperity.
European leaders will doubtless blame others for unfair competition etc but sadly the errors are multi decade and lie only at Europe’s door. Europe’s welfare depends on her highly educated and entrepreneurial people to be free from heavy regulation & taxes. Only their renewed success will pay for Europe’s next generation of hospitals, schools and infrastructure etc. It is becoming vital therefore Europe changes course for our next generation’s welfare.
Please enjoy the holiday break as the markets will begin again very soon.
The very best to you and your families and thank you for your continued support of this site.
Rich