Economic Predictions And Trends For 2017

Trend watching, especially when it comes to what is happening in the economy is always interesting, sometimes very exciting and occasionally a bit of a let down. In 2017 we’ve been highly focused on political news, and the new trend of what is fake and what is not, and the economies have been in something of a state of flux as a result, but here are some directions that we’ve been going in that may continue into next year.

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American expansion

The soothsayers predicted that the sustainable expansion seen during the Obama era would suddenly see expansion with the election of Trump. Was that because he is a businessman rather than politician? Perhaps, but Donald’s big boom hasn’t yet happened, although there is some growth.

The Brexit Effect

Many foresaw that the UK leaving the EU would bring uncertainty to the UK economy, and guess what, it has done just that. Every time a statement is made from Downing St. about the state of the exit negotiations, the markets either have a moment of hope, or take a nosedive. Expect to see more of this.

The EU

Euro-sceptics said that the Netherlands, France and Germany would surprise everyone with a vote against membership of the EU. So far, elections in France and the Netherlands have shown strong support for the EU and it is now hard to imagine that Germany will show any inclination to leave.

Chinese stability

China’s economy is looking increasingly stable and its deflation pressures are easing. Lowered interest rates will ease the country’s high debt levels and this helps the global community as well.

Watch Trump

It has been quite a year of watching Trump and what he tweets, and then watching how stock markets and other governments respond. He was very bullish about China and imposing high tariffs on their goods during his election campaign, but so far any anti-trade action has been subdued, perhaps due to the fact he is now more preoccupied with North Korea. But Trump and China is still one to watch.

Interest rates

As predicted in 2017, the USA has hiked interest rates twice this year so far. This is a show of confidence in the U.S. economy thanks to a rise in employment levels. Will this continue? We have yet to see. The UK by contrast has been extremely cautious with its interest rates and a speech by Mark Carney, Governor of the Bank of England on 19th September 2017, suggested that any rises would be “limited and gradual.” This gave sterling a very slight advantage over the dollar during trading following the announcement, and the pound has been bouncing up and down all day and the FTSE 100 went into the red. What will happen with sterling and the dollar by December is the question everyone would like an answer to.

Higher stock prices

In 2017, stock prices have looked extremely solid and have followed an upward trajectory as predicted in 2016. We can expect to see this continue into 2018.

 

 

 

 

The world’s 6 best performing economies

It is interesting to note that although there are shifts in the best performing economies from time to time, overall they tend to remain the same. You could say that the ‘usual suspects’ are always at the head of the list, but there are undoubtedly some threats to the Big Daddy of world economies, and I am referring to the USA.

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The United States of America

It is still No.1 in terms of nominal GDP. In fact it accounts for 25% of the world’s gross product. It takes this spot thanks to its advanced technology, infrastructure and natural resources and it only beats China due to the fact that its GDP per capita is higher. GDP per capita for the US economy is approximately $59,609 versus $16,676 in China.

China


With a GDP of $23.19 trillion it should be in No.1 position. It has transformed itself from a closed economy into a manufacturing and exporting hub. This started back in 1978 and since then it has achieved on average, an annual economic growth of 10%. It has lifted almost 1.3 billion people out of poverty and it is estimated that it will pull into the top spot over the next few years.

Japan

The Land of the Rising Sun is still a world economic leader with a GDP of $4.8 trillion, although it has been going through some challenging times since 2008 when it showed symptoms of a recession. Further strains have been put on the economy by a weak currency and subzero bonds, but growth of 1.2% is predicted for 2017 and it is likely to stay at around 1% for the next five years.

Germany

Germany remains Europe’s largest economy and forth in the world in terms of GDP. Its strength lies in exports of machinery, automobiles, chemicals and household equipment, plus it has a skilled labour force. It does face some challenges, including the UK’s Brexit and a refugee crisis. However, it is predicted that it will maintain stable growth at about 1%-2%.

United Kingdom

The UK is in fifth place with a GDP of $2.5 trillion. It is driven by service industries, particularly in the financial sector, which accounts for 75% of GDP. Manufacturing and agriculture are small, but important contributors. However, its current position is threatened by the decision to leave the EU and economist predicts that it could result in anywhere between a 2.2% to a 9.5% loss in GDP. So, its future in the league table is uncertain.

India

India has a GDP of $2.45 trillion. Its large population lowers its GDP per capita and it is very dependent on agriculture compared with Western countries. However, the services sector now accounts for 57% of the GDP, while industry contributes 26%. The economy’s strength lies in a limited dependence on exports, high saving rates, favourable demographics and a rising middle class. It is now a faster growing economy than China and is expected to rise to fourth place by 2022.

The Top 6 are followed by France, Brazil, Italy and Canada. It will be interesting to watch what happens. Predictions say the leader list will look much the same in 2022 as it does now – let’s see,

 

Stop Focusing On Short-Term Results

Firms get very excited when their half-year results are good, but what does six months of great profits and soaring stocks really mean in the bigger picture. Is there a good reason to feel things are going so well that there is no need to consider a downside? I don’t think so. But, the short-term should not be your focus when markets are buoyant, or when they in a decline.

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Let’s say you look back at what was happening a year or two years ago. Perhaps your business was doing well, but did you make any changes as a result of improvements in performance. On the whole, large and small businesses tend not to do anything; they feel content with the status quo. And there is a good reason for this.

The media creates panic

Even political activity that makes the markets jittery is just a lot of noise in the media. The markets react in their own way. As I’m writing this, North Korea has just fired a test missile over Japan and newspapers report that the Dow Jones opened at lower average and buying of physical gold is up. Whatever happens, there will always be a short-term response to the situation. But that is just today’s story. There is another picture to consider.

Currently the markets are pretty strong –the response to North Korea aside –but everyone who invests knows that what goes up can also come down. I’m not sure when the markets might start to be more ‘bear’ than ‘bull’, but one thing is certain – it will happen.

The history of ups and downs

You only have to look at history to know this is true. For example, Capital Research produced an overview of market declines based on the Dow Jones Industrial Average from 1900 to 2016 and they found something interesting:

  • There is a decline of roughly 5% three times every year
  • About once per annum there is a decline of around 10%
  • Approximately every two years, the 10% decline will become a 15% decline
  • Every 3.5 years the market decline will reach 20%+

So, what does this tell us? First, that there are declines every year and that makes them ‘normal. The research also shows that 2015 was the last year in which there was a 5% decline, and this means, based on probability, that there will be one coming soon. And, finally, even though we have declines, things always pick up again.

Focus on the long-term

This is important information to consider when you’re investing for the long-term. Accept that there will always be a downturn and factor that into your investment plan. Don’t panic when a market starts to drop, and don’t suddenly pull out unless you really have to, because as the research shows, sooner rather than later, your investment will be back on track again.

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Future World Governments

Political systems go through change, as history shows us, and as technology and society advances and changes, we are certain to see some alterations in the style of government around the world. There are a few ways that our governments may look dramatically different in the future and some of them are potentially terrifying. Here are five possible scenarios.

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A Noocracy

This is a political system based on the “priority of the human mind.” The concept comes from the Jesuit mystic Teilhard de Chardin, who saw this as a possible evolution of democracy that would create “a flexible and adaptable system comprised of conscious, systematic, and institutionalized elements which will operate in decentralized autonomous subsystems.” The upshot of a system like this is the development of a hive-like civilisation brain that integrates all individual minds, both human and AI, through information networks.

A Cyberocracy

In this system, governments would rule by the effective use of information. This could take two forms: one that supplants bureaucracy and technocracy as we know it, and or one that redefines the relationship between the state and society. It will be driven by decisions based on information, which means a government will seek to obtain as much information as possible about everyone and every entity. It is likely to result in a bureaucratic system run by administrative AIs.

A democratic global government

A global liberal democracy will be one capable of “ending nuclear proliferation, ensuring global security, intervening to end genocide, defending human rights, and putting a stop to human-caused climate change,” says George Dvorsky. We are already on the way to this in terms of culture and economics, but we have yet to reach the political stage. The European Union is an example of this type of government on a small scale.

A Futarchy

This system is the creation of economist George Mason and futurist Robin Hanson. They say that under a futarchy we would “vot on values, but bet on beliefs.” How does that work? Hanson says: “Elected representatives would formally define and manage an after-the-fact numerical measure of national welfare. Market speculators would set prices that estimate national welfare conditional on adopting proposed policies. When the market estimate of welfare conditional on adopting a policy is higher than the estimate conditional on non-adoption, that proposal becomes law.”

Post Apocalypse Hunter-Gatherers

Finally, there is the possibility that we will experience a catastrophic event – natural or man made– that forces us back into a paleolithic political system in which we will return to living in small tribal groups, existing by hunting and gathering for our existence.

Which type of futuristic government would you prefer if you had a choice? I look forward to hearing your views.

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