Archive for June, 2020

Update: Top 10 Predictions For The New Normal

Tuesday, June 30th, 2020

I think that it’s safe to say that 2020 has so far turned out to be far different than anyone expected (or envisioned in their worst nightmare). The global pandemic has changed our lives in almost incomprehensible ways. I thought it would be appropriate to provide an update to my 2020 predictions – because while things are different, we’re still going to have elections in November, the markets are still open and life goes on, albeit very differently.

Now – I’m not abandoning my earlier predictions nor asking for a do-over. However as I sit here a little more than six months after I made my initial predictions, my  view of what the next six months will bring has been dramatically altered.

My initial predictions are presented below with an updated prediction in bold. I am going to try my best to be optimistic but also realistic. And as always, I am predicting what I think will happen.

10 – President Trump will be acquitted in the Senate and remain in office. No information has yet emerged that indicates that Republicans in Congress who have supported him so far will change their minds. While this is currently the expected result, what I am really predicting here is that no bombshells will appear that will result in the Republican-led Senate turning against Trump. There will also be talk among Democrats of a second impeachment soon after the election, and before the year ends. Kind of hard to update this prediction other than to say that there has already been talk of a second impeachment and additional hearings into some of the conduct of the Administration, At this point, however, I think as a nation we are too tired and distracted to do much here. It will be all about fighting the pandemic, making progress on social justice reform and of course the election.

9 – Joe Biden will be the Democratic nominee and pick Kamala Harris as his running partner. I am sticking with this. If not Harris, however, my money would be on Val Demings.

8 – President Trump will be re-elected (with Mike Pence as his VP) after one of the ugliest campaigns in modern history, and the country will remain deeply divided. The Republicans will keep the Senate (barely) and the Democrats will keep the House but with a smaller majority. At least one if not two members of the “Squad” will lose in their re-election bids. I now believe that the Democrats will sweep the election and win the presidency and both Houses of Congress. The left wing of the party will actually take more of the seats on the Democratic side and the “Squad” will stay intact. I believe that there is a 75% chance that Biden will win in a landslide. Trump will not fight leaving office, but will announce an unprecedented number of controversial pardons before he goes.

7 – There will be some legislative progress early in the year, post-impeachment trial, as both parties will be hungry to show the country progress. The final revised U.S.-Mexico-Canada Agreement and an infrastructure bill will be two of the successes. No meaningful legislation will pass after June with the exception of a trade deal with the U.K. I’m not sure that the stimulus packages that have been passed would count here since no one could have anticipated them. The new trade deal was finalized earlier in the year. Trump recently mentioned an infrastructure bill but I don’t see anything other than perhaps one more stimulus bill being passed the rest of the year. We are already in campaign mode; Congress couldn’t even make significant progress on law enforcement reform in the face of the mass nation-wide demonstrations. 

6 – Brexit will occur early in the year thanks to the surprisingly large Conservative victory in the general election held in December; Boris Johnson’s gamble worked. The U.S. and Britain will sign a comprehensive new trade agreement during the year, and Britain will negotiate a trade agreement with the EU so that it will not be a no-deal Brexit despite year-end concerns that a deal might not be struck. The U.S. will not have a new trade agreement with Britain before the end of the year. I don’t think there will be a final agreement on Brexit before year-end either. There may be an extension however, given the pandemic, so the discussion of a deal v. no-deal Brexit might be pushed into 2021. Finally, Trump will increase European tariffs before the end of the year on some products, increasing tensions with these countries.

5 – Elsewhere overseas, Merkel will call new elections and not be President of Germany at the end of the year. Netanyahu will not be Prime Minister of Israel at year-end either, and may in fact be standing trial by year-end. I also predict that Netanyahu will not even be the candidate for PM in the upcoming election, as the Likud Party will turn him out in the wake of his legal problems. Political turmoil in France will continue, further dimming Macron’s political future. There will be no progress toward Middle East peace once again, and the growing divide between Trump and Kim Jong-un will increase. Markel will in fact stay in power, as she has gained even more stature thanks to her response to the pandemic. Netanyahu will leave office at the end of next year as part of a power-sharing agreement made to be able to form a government, but his power will wane with Trump’s defeat and he will never be PM again (this is more of  a 2021 story). No progress will of course be made with North Korea for the rest of the year, but I don’t think tensions will escalate before the election. Trump will also not confront Putin despite continued Russian interference. His relationship with Putin will be a very big issue in the election, and not be a positive for him. World leaders helped by the pandemic in addition to Merkel include Trudeau in Canada. Macron remains weakened and Boris Johnson has been hurt by the UKs initial response to the pandemic, and while he will stay in office for now, his political future looks bleak.

4 – The economy will do surprisingly well as overall trade tensions will ease with China, but it will again be up and down and progress will be slow (Trump will be very accommodating with his policies and rhetoric, recognizing that this is the only way he will win re-election). The U.S. Federal Reserve, while considering increasing interest rates, will remain neutral throughout the year so as not to be seen influencing the election. The Fed will continue its proactive actions to prop up the economy in the face of the pandemic, but this will be in the form of additional asset purchases rather than interest rate cuts for the remainder of the year. The country will end the year in recession, as the recent flair-ups in the pandemic will slow economic growth and ensure that there is no v-shaped recovery. 

3 – The stock market will also do better than expected, rising about 10% (S&P 500). There will be general relief that the Democratic candidates at the far left of the spectrum will not be on the ticket and again Trump will do everything he can to help boost the economy and to take credit. The market will give back some of its recents gains over the rest of the year, but will not retest the March lows. While typically the market would fear the election of a Democrat, and one party winning the presidency and Congress, I believe the market will rally after the election on hope for a more unified country moving forward. The market will end the year down between 3% and 5% and will be volatile along the way. GDP growth will remain negative through the end of the year with debt levels growing to unprecedented levels.

2 – It will be a quiet year for the financial services industry, as fewer mergers are apt to take place in an election year. The anti-finance rhetoric of the left will also be muffled after the Democratic nominee is decided. The first Bitcoin ETF will be approved in a surprising resurgence of the crypto-currency. Other than the Schwab/TD merger, and the recent Orion/Brinker Capital merger, it has been a quiet year, but for different reasons than I had previously believed. No resurgence of Bitcoin. There will be a continued move to a cashless society in the face of the pandemic. Not much will happen the rest of the year as the election looms and companies in general do not want to make changes that might worry investors who are already on edge. 

1 – And turning to sports, I will try to redeem myself after two bad years in a row. LSU will win the NCAA Football National Championship. The Ravens will beat the 49ers in the Super Bowl. Louisville will win the NCAA Basketball Championship. The Washington Capitals will win the Stanley Cup, the Milwaukee Bucks will win the NBA Championship and the NY Yankees will rise again and win the World Series. Not sure what to say here – although LSU did win. There will be no NCAA Basketball champion, and while I hate to say this, while the major league seasons will either start or restart soon, I am not convinced that they won’t be shuttered again and no champions crowned. I actually lean toward this being the case, as well as there being at best an abbreviated college football season. So no further predictions here – too much uncertainty. Big money talks, but at the end of the day if the players believe that their health is in danger then there is no way sports seasons can continue.