"As for me, all I know is that I know nothing." - Socrates
The quote is a paradox within itself, but sums up the outlook of anyone that has gleaned a grain of wisdom in their life. Yet, here I am offering predictions for the future, a thing one could know with even less certainty than present conditions. We study trends, monitor political events, consider "cui bono" in all events and give it the old college try.
- Gold at $1,500: The gold price will climb above $1,500 in 2017, with the potential to claw back towards all-time highs in the event of a currency crisis, major war or other black swan event. December 2015 will prove to be the bottom of the correction and gold will once again embark on a multi-year bull cycle.
- Silver at $25: The silver price will climb above $25 in 2017 with the potential to reach towards $30 per ounce. It will be pulled higher by gold, but also buoyed by increased industrial demand, clean-tech demand and military spending.
- Dollar Rally Fades: The dollar may rally a bit higher, but the USD index will ultimately drop back below 100 during 2017 as government spending picks up and deficits soar. The de-dollarization trend will continue in earnest.
- Stock Market Crashes: The stock market will crash hard, retracing at least 1/3 and up to 1/2 of the gains realized since the 2008/2009 financial crisis. Equity valuations are frothy by any number of measures as investors have been chasing yield in the NIRP economic environment. Once the slide begins, panicked investors will rush for the exits.
- Fed Cautious with Rate Hikes: The Fed will be unable to continue raising interest rates beyond one or two more token 25 basis point increases. They may reverse course by the end of 2017 in order to support falling stock prices and avoid another Great Recession.
- Oil Prices Slides Back Below $40: The oil price will drop below $40 again during 2017. OPEC will be all over the map in regards to production cuts, domestic drilling will continue to supply the markets, fracking and new technology will increase supply as well as major new discoveries (including the recent Wolfcamp Shales find in Texas) end up being much larger than expected. It is already estimated to be the largest oil discovery ever in the United States. I see little demand growth.
- Real Estate Prices Roll Over: U.S. real estate prices will finally top and begin falling in 2017 for the first time since 2011. Stagnating real wage growth and higher mortgage rates will cool demand considerably and another major housing correction will occur within the next few years.
- Trade War with China: A trade war with China ensues, as President Trump looks to apply his business negotiation skills in the political arena. New tariffs imposed by the U.S. are countered by increasing prices on Chinese imports and a major slowdown in the $600 billion in trade between the two nations.
- Major Military Conflict: A major military conflict breaks out between one or more world powers. I hate to make this prediction, but tensions are high with China over Taiwan and the disputed islands in the South China Sea. While I am hopeful that relations with Russia improve with Trump as President, NATO continues to poke the bear, surrounding them with military bases, missile defense systems, imposing new sanctions, expelling their ambassadors, etc. North Korea also continues to increase their nuclear capability with the potential to reach the Western United States over the next few years. Hopefully, this conflict is only an isolated event that can be resolved diplomatically and does not escalate into full-scale war.
- Sports Predictions for 2017: And to keep things light, the Golden State Warriors win the NBA championship, the Cubs repeat at the World Series and the Patriots win the Superbowl again.