A cura di Walter Snyder, Swiss Financial Consulting
The end of the year is when one takes stock of the year that is ending and reckons what will happen in the coming year. This Newsletter was totally wrong about a stock market correction October as the market has reached new highs recently. Gold has not made a comeback and is trading under US$ 1,300.00 thanks to the BIS. The US dollar has remained strong and promises to increase in value thanks to Fed interest rate hikes even though the Chinese and Russians have been plotting the demise of the petrodollar. The oil price did remain near US$ 50.00 for quite a while, and that was a neat call. The price will probably go up further in 2018.
Given all that, the position taken regarding bonds can be considered reasonable as bond yields remained low and in some cases were even negative. Fifty year bonds in Swiss francs that practically have no yield at all are not a good investment. With the Fed looking to put three more interest rate increases into effect in 2018, the situation for bonds will change. As the European economy recovers, Mr Draghi will have to reconsider his bond buying programme due to increased inflation as pressure on wages has become an important factor, and unions have realized that companies are making money as the European stock markets make share holders richer.
In any case most market observers are of the opinion that US equities are overpriced and a correction in January may take place as money managers lock in profits that they will not have to pay tax on any time soon. It is also clear that investors have not been careful about calculating risk and have become not only greedy but accustomed to having their portfolios increase in value due to speculation and the prospects of future earnings.
Normally this newsletter does not examine in any detail if at all what is happening in international politics. Unfortunately it seems that 2018 may see some fireworks in the Middle East and the Far East. Iran and Hezbollah along with the Russians have helped Assad so far to survive a nasty war. The Kurds will probably be swept away in the storm that is coming as the Turks will try to ensure that no autonomous Kurdish state comes into being in Syria. Israel will urge the US to strike Iran as soon as possible on the grounds that Teheran and not Washington has been promoting terrorism in the region.
It is not clear how things will play out in Korea, but Washington has been preparing for the conflict and the propaganda machine has been working overtime to convince the public that North Korea poses an existential treat to the US just like Saddam and his weapons of mass destruction (WMD) that were never found.