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Looking into the crystal ball for 2017

After a surprising end to 2016, Director of Investor Relations Andrew Rowell looks at what’s ahead in 2017.

As we look at some of the emerging trends for the coming year, it’s fair to say that we have a healthy amount of scepticism regarding the old crystal ball at present – particularly given that it, along with just about every other commentator, failed to predict a Donald Trump presidency.

Assuming the crystal ball is actually okay (or that the election was rigged??), let’s have a look at what the smart forecasters are looking out for in calendar year 2017.

The Fortune magazine, acknowledging the Trump prediction issue, gave caution to its forecasts, with a mixed view for the year ahead. It sees continuing growth for tech disrupters like Uber and AirBnB; slower growth for VR technologies; and a NYSE stock market decline of 3% over the year. Much of this decline is put down to uncertainty over Trump, with potential for this to be reversed if the more radical aspects of his campaign promises are abandoned.

Interestingly, the folks over at UBS see a much rosier “half glass full” response for the Australian equities market, with a predicted rise of 6.5% for the ASX200 over the year. While some of this has to do with an expectation that Trump won’t act too crazy, they are also banking on a stronger showing from the resources sector over the year. We have started to see this already, with iron ore bouncing off its lows and coking coal doubling in price over the past six months.

UK investor website, The Market Oracle, also sees positivity across the UK market for the coming year, despite short term jolt potential regarding Brexit. The three key sectors that it sees as being outperformers for 2017 are financials, industrials and base metals, namely zinc and copper. Much of this buoyancy comes from viewing Trump’s pro-infrastructure plans as being positive for all companies that are related to this sector. More infrastructure = more demand for commodities and building companies.

Deloitte’s view of the Australian economy post-Trump is that the short term worries may not be as bad as expected, however in the longer term, structural changes, such as the planned US tax cuts, could have broader net negative impacts on the global economy. It points to lagging wages growth and lower than expected company tax receipts as contributors to Federal Budget deficits well out beyond 2020/21, something the Australian Treasurer has not dismissed.

So what does this all boil down to? The market will either go up or it will go down. The impacts of Trump as President will either be positive or negative in the short and longer term and commodity prices will continue to waver around. Now, where’s that octopus?