Trump President: Policies and ImpactNovember 10, 2016
Do you teach your children about money?January 27, 2017
2016 started badly for investors with worries about global growth and deflation. But global growth turned out okay &, despite political events, rising bond yields & disappointing Australian growth, the end result has been a constrained but okay year for diversified investors.
2017 is likely to see another year of okay & maybe even slightly higher global growth, higher inflation, higher bond yields after a pause and divergent monetary conditions as the Fed tightens but other countries stay easy. The RBA is likely to cut rates to 1.25%.
Most growth assets, including shares are likely to trend higher, resulting in reasonable returns in 2017.
What to watch?
The main things to keep an eye on in 2017 are:
- US economic policy under President Trump – in particular whether the focus is on fiscal stimulus and deregulation as opposed to starting a trade war with China;
- How aggressively the Fed raises rates – faster inflation could speed it up putting more upwards pressure on the $US;
- A rapid rise in bond yields – this would be bad for shares and growth assets but a gradual rise would be okay;
- Elections in the Netherlands, France, Germany and maybe Italy which could reignite Eurozone break-up fears if anti-Euro populists win (which I doubt they will);
- Whether China continues to avoid a hard landing;
- Whether non-mining investment picks up in Australia – a failure to do so could see aggressive RBA easing – and how a surge in apartment supply impacts property prices; and
- Ongoing geopolitical flare ups, eg in the South China Sea.