In today’s Money Morning, this little monkey gets out his board and throws darts at it.
It’s New Year’s predictions time.
Want to know precisely what’s going to happen next year? Well, sort of precisely.
Then read on…
My 12 big predictions for 2015
A quick reminder of the rules: I score two points for a hit, one point for a near hit, no points for a miss, and minus one for what my youngest would call an ‘epic fail’. The system is not perfect, but it is simple.
I try to be more specific than, ‘X will go up’, or ‘Y will fall’ – so there’s a bit more to a prediction than 50:50. In fact, the probability of scoring a two is quite slim in many cases. And as a trader-investor, I very much reserve the right to change tack as circumstances change. But, all the same, let’s see if I can do better than last year’s distinctly average effort.
1. Gold
I’m feeling a lot more bullish about gold than I have done for some time. It was down a few bucks against the US dollar in 2014, but it was up against most other currencies. You know how I obsess about trends – well, we now have nicely defined uptrends for gold in place against the euro and the pound. There’s a long, strong base in place, gold is moving up steadily and sitting on top of its moving averages, which are also flat or rising.
I think the US dollar will remain strong – for the first few months of the year at least – so gold’s gains may not be entirely apparent. It will be a stealth bull market, as it creeps up against non-US-dollar currencies. But I remain of the mind that the worst of the bear market is over.
So, to specifics: a high for the year of $1,350 an ounce. And a low of, hmmm… I’d rather be overly bearish and wrong, than overly bullish and wrong, so I’m going to say $1,050. But look at the sterling price of gold and you’ll feel rather better about things.
2. Gold miners
The strong dollar, strong-ish gold environment is quite favourable to the miners for reasons I plan to explain next week (basically, their profits are in strong dollars, while a big chunk of their costs are in weaker local currencies). Fuel costs are falling too. If only miners weren’t so loathed for the financial ruin they have brought to investors post-2011.
The XAU – an index of 16 of the largest gold mining companies – will move above $100 (the current price is $73). The HUI – the AMEX Gold BUGS (Basket of Unhedged Gold Stocks) index of 15 of the largest gold producers will see $250 (current price: $175). The XAU won’t fall below $60 and the HUI won’t go below $145.
3. Sterling
Something is very wrong with sterling at present. Barely six months ago, it had broken above $1.70. Now it’s $1.51 and sinking. It’s even being outperformed by the euro, which has the Greek exit sitting on its plate. Sterling weakness will continue towards the election in May, I suspect, but I’m watching this one every day – we are so oversold there is bound to be a trade-able rally.
A high for the year near $1.62. As for the lows, I think we’ll break last year’s lows of $1.48, head below $1.45 and perhaps even get within spitting distance of $1.40.
4. The euro (vs the dollar)
The euro’s low for the year is somewhere near $1.08. Its high will be in the $1.30-$1.35 zone.
5. Interest rates
The only way I can currently see interest rates rising in the UK is in the event of some kind of sterling crisis. So no rises here. If they’re going to rise anywhere it will be in the US, but I’m not even sure we’ll see that in 2015.
6. Oil
I don’t believe anyone in January 2014 said we’d see $50 oil last year. Saxobank suggested $80 a barrel – and their predictions are supposed to be outrageous. Can oil go as low as $35? It’s possible. But $70-$75 also looks possible. Let’s say a low of $40 and a high of around $60. (I’m talking West Texas Intermediate.) On this one, I really am guessing.
7. US stock markets
After a bonanza couple of years, the major indices – even the seemingly impervious US exchanges – all look a bit dodgy. Every day this year’s been a down day – and whither the first few days of January, thither the rest of the year.
I can’t decide if I’m a bull or a bear. But my prediction is that the Nasdaq will be a stand-out performer, managing a re-test of its old, year 2000 high just over 4,800. (The current price is 4,120.)
8. FTSE 100
A high somewhere near 6,900, a low around 6,000.
9. The general election
Lots of twists, turns, fear-mongering, gerrymandering, tactical voting and goodness knows what else, not to mention the most devious manipulation of statistics (all political parties will be guilty of it) ever seen in a general election.
But, socially, nothing much will change as a result. There’ll be no revolution. And we’ll end up with some kind of Tory-led coalition. But who’ll be part of it? Certainly, the Ulster Unionists. Then what? More LibDems? Maybe, though they’re not going to win many seats. Ukip? Probably. The SNP? Now wouldn’t that be interesting?!
LabTory is also looking increasingly possible – done ‘for the greater good of the nation’ – but a Tory-led coalition is my prediction. By the way, have you noticed how LabTory looks suspiciously like ‘LavaTory’?
10. The EU
A lot of noise, a lot of panic, a lot of blame-throwing – but the EU somehow stays intact for another year.
11. UK house prices
The general call is for the market to continue atrophying – both in price and activity – particularly for property over £1.5m. But I do see a pick-up in activity – and possibly even prices – beneath £925,000 as possible. It’s difficult to be an outright bear in this low-rate environment.
I’m bearish. I think we’ll see falls. But it’s difficult to be an outright bear on this low rate environment. Further stand-off seems more likely.
But one sector looks very vulnerable – high-end, new-build flats in London, particularly in Vauxhall and out east. These have bubble and pop written all over them.
They’re marketed overseas – so are vulnerable to all sorts of factors beyond anyone’s control (the Russian rouble collapse being one example). Many of those that have already been bought are unoccupied (drive past the UK’s tallest residential building, the Vauxhall Tower, at night – barely a light is on) – which leads them vulnerable to a vacancy tax (Islington has already proposed this).
There are also just too many of them. Asking prices are already falling, yet locals will not be interested – for the kind of money currently being asked, they can often get a much nicer period property.
This is a bubble that probably won’t go pop until 2016, but I want to be the first to call it – so I’m calling it now.
12. Brucey Bonus sports prediction
Chelsea win the league. Leicester, Burnley and Hull go down.
So this monkey has thrown his darts. Now let’s see if any them hit.