I will unveil my Top 10 Predictions for 2015 next week, but for now, lets see how I did this year. Original text is following by my comments in bold.
10 – The Republicans will keep the House of Representatives but fall short of capturing a majority in the Senate (although they will pick up net seats). The Republicans should be able to pick-up enough seats to take control of the Senate, but self inflicted primary wounds, led by Tea Party challenges, will hurt them once again. I was half right here, as the Republicans actually did pick-up the Senate because they avoided the pitfall of having extreme candidates. I guess I should be a pollster in my next life, as they didn’t do much better!
9 – Riding off of the momentum of the budget agreement, there will be no threats of government shutdown next year, there will be a small increase in bipartisan cooperation, but given that it is an election year, there will be no far reaching immigration reform or gun control legislation passed. The only progress I see next year, and it would be in the Republicans best interest to pursue this course, would be some smaller pieces of immigration legislation. On the gun control side, momentum only seems to be on the side of an overall of the mental health system. The debt limit discussions will be contentious, but will be solved without the US defaulting. I was pretty on target here except that even small pieces of legislation were not passed on immigration or gun control. The President has taken executive action on immigration, the impact of which we will feel next year – you’ll see my take on it next week.
8 – The problems with the Obamacare website rollout will seem minor next year as the reality of the totality of the massive law and its implementation move forward. The benefits of the program will be outweighed by younger people not signing up, choosing instead to pay the penalty, growing anger at not being able to keep doctors, and as the year progresses, the reality that costs will go up in 2015 as insurance companies lose lots of money. I was pretty on base here. Rates have increased for 2015 and the website has been a non-issue. The Supreme Court has some decisions to make next year, and it is still not clear how many people opted to pay the penalty. We will have to stay tuned for the conclusion of this number!
7 – The Federal Reserve will begin to taper in the first quarter, although I don’t think the taper will be significant early on. The overall path of the Fed will remain the same under Chairperson Yellon. (It is a little dangerous making this prediction now since there is a chance that the Fed will begin the taper this week, but I fall in the camp that says they will wait – they may announce something, however.) The Fed remains dovish and the quantitative easing program ended in October. While the US economy is relatively strong, the rest of the world continues to be mired in slow growth, with Europe and perhaps Japan set to potentially go back into recession. This will limit the range of actions available to the Fed.
6 – The stock market will have an average year. I think the markets have, to a large extent, priced the taper in already, so I don’t think Fed actions will significantly impact the market. Coming off of a banner 2013 (which I did not predict), it is only natural that the market revert to more normal returns. There will be a natural bull market correction during the year, and by next December I see the S&P 500 up a modest 7% – 10% for the year. I was right here – a relatively good year for the market with only that minor almost 7% correction during the first two weeks of October. Volatility was tame most of the year, but re-emerged in the fourth quarter.
5 – Europe will continue to grow modestly and I don’t foresee any large crises within the EU or the Euro bloc. The worst seems to be behind most of these countries from an economic standpoint. No countries will exit the Euro – there won’t even be much or any talk about that anymore. The Euro was really a non-issue with no talk of countries leaving the currency. There was however a crisis that I missed – as do most other people – the Russian interference in The Ukraine/Crimea. And to say moderate growth would be generous – the threat of a triple dip recession in 2015 is very real.
4 – Hillary Clinton will finally signal that she will run for President in 2016. While it is too soon to make any predictions about how that will go, I think her record as Secretary of State will come under increased scrutiny, and while she will remain the front runner, my only preview of my thoughts on the actual election is that the campaign will be a lot tougher than people think. There is no certainty that she will actually get elected. Kind of right. She has done just about everything but declare already, and her book tour, which was meant to be a pre-cursor to her campaign did not go as smoothly as she would have hoped. The reality here is that she is not the world’s best campaigner…..More to come on Hillary next week!
For Financial Services:
3 – Elizabeth Warren will continue to raise her public profile and try to “stick it” to banks and other industry participants. This will be part of the Democratic election strategy – along with helping the middle class – that will be utilized to overcome the Republican’s continued slamming of Obamacare. Actual progress on new legislation will be slow. I was right here as in the aftermath of the election Elizabeth Warren was elevated into the Democratic leadership and she has continued to bash Wall Street. The strategy did not help the Democrats in the election – nothing really did – but her elevation makes it pretty certain that these issues will be front and center in the run-up to the Presidential election.
2 – It will be a good year for the wirehouses as they continue their comeback from 2008. There will be less negative news about them in the press. The RIA and independent markets will continue to grow – but there is room enough for both! I think this was true – I saw more positive stories about the wirehouses than negative ones, and the industry as a whole had a good year.
1 – ETFs and retail alternative investments will start to get some negative press. As first ETFs and then alternative investment mutual funds have grown, they have received generally favorable press. I have been leery of both, particularly retail alternatives, and I think the press will finally start to raise some questions. I think this is also true, although not to a significant extent. People are beginning to questions retail alternative investments more than ETFs, but they do remain popular. Stay tuned on this issue as well – I see more happening in 2015!
Finally – sports. (I usually go over 10!). Florida State will win the collegiate national championship, ending the dream season of Auburn. The Seattle Seahawks will beat the Denver Broncos in the Super Bowl – yes, Payton and his pals will choke again. I nailed these! And choke the Broncos did in the Super Bowl – actually put a large damper on my Super Bowl Party. And as of this writing, Florida State has still not lost a game! We’ll see about the first college playoff series though …..