If you’re anything like me you have spent the best part of the last 4 days in a vortex of family visits, games, huge dinners, turkey soup and over-indulgence.
Enjoy the festive spirit while it lasts, because the slow hangover is likely to make 2012 another tough year. At the risk of these looking fainlty ridicilous in a year’s time, here are my personal predictions for the next twelve months.
1. The Year of the Dollar – 2012 will be the year that the US dollar makes a comeback. The vast American debt burden, presidential elections, and even the downgrade of its triple A credit status will be overlooked as there is a renewed flight to the world’s reserve currency. America entered recession early and it will leave recession early. In 2012 house prices will finally start a slow recovery in the US, domestic demand will stop falling, and US business will begin to restock. The S&P500 will end the year lower than it started, but the dollar will be higher.
2. The slow demise of Apple. Apple has had another stellar year in 2011. In fact in the last three years alone Apple shares have gone from $90 each to over $400. In the same time Blackberry / RIM (who I also predict will decline even further in 2012) have seen their shares collapse from $100 to under $14. However, I think Apple is at their peak and 2012 will be the start of the descent. Android will continue to take market share, driven by new phones such as the Nexus and the Galaxy S3. The iPhone 5 is certain to be a huge success – Apple’s cult-like following will make sure of that. But in the mainstream I foresee a backlash against the high prices and restrictive all-controlling environment of Apple phones.
3. Gold. For the first year since 1999 Gold will end 2012 at a lower price than it started. The threat of deflation, a slowdown in developing countries and a highly volatile world economy will not favour Gold. Towards the end of the year Gold will recover, and looking further ahead I certainly expect Gold to surpass its previous highs of just under $2000 and ounce. But for that I think we will need to wait until 2013. Will I be selling? No way. Gold is still in the best insurance against profligate and incompetent governments. If you don’t hold any yet then 2012 could offer you a great chance to get in before it goes stellar.
4. Ed Milliband. Poor poll ratings in 2012 will put huge pressure on Ed Miliband to step down as leader of the Labour party. However, deepening recession will keep the left strong and will drive the search for an alternative to the perceived pro-bank, pro-US, capitalist slant of the Cameron government. Ed Milliband will survive and will end the year on a higher approval rating than the current dismal minus 23 points.
5. The London Olympics will pass off without any major incident. No terrorism, no catastrophe, and no major embarrassment. There will be plenty of huffing and discontent around the traffic chaos, the excessive privileges offered to some foreign governments and to the IOC members, as they are whisked from 5* hotel to Olympics to opulent after-party. However, once it’s all over it will be looked back on as a success, despite our perceived disappointing medal haul. Now, what to do with a few spare stadiums? Another Millennium dome anyone?
6. Recession. Britain will re-enter recession in 2012. We enter the New Year with an anaemic growth rate of less than 0.2%. That will fall and we will enter recession early in 2012, and probably stay there for most of the year. Its going to be a painful year, with little or no growth, no prospect of tax cuts, and a renewed round of austerity.
7. The British pound will weaken significantly against the dollar in 2012, making shopping trips to New York more expensive. From the current level of 1.56 dollars to the pound, it will fall to around 1.4, a drop of over 10%, on top of the 20% drop since 2008.
8. Inflation vs. Deflation. The battle of the flations will be won by deflation in 2012. Prices will fall as demand tails off in the Far East, oil and commodities drop and families reduce their spending. However we will not see outright deflation in 2012. The falling pound and more quantitative easing will keep inflation higher than it would otherwise be, but it will end up lower than the current 5.5%.
9. The Deficit and the Cuts. The deficit will remain stubbornly high, showing that the OBS predictions are no more reliable than when economic projections were still provided by the government itself. Unfortunately the fragile coalition and an impotent chancellor will mean that the much-needed cuts to pensions and the public sector will remain as feeble as they are now. There will be more of the same. It will take much more suffering before there is any appetite for real swingeing cuts to the public sector and to the bloated state machine. That will come, but not in 2012.
10. The Euro. How could any predictions finish without a view on the Euro? I think the Euro will survive 2012. The huge €450 M of cheap loans provided by the ECB will keep banks afloat long enough to raise some new financing. Throughout 2012 there will continue to be treaty negotiations, a frequent recurrence of the crises and many more “last-chance, make or break” summits. The Euro will continue to weaken, but some periphery countries including Ireland will do better than expected. Overall recession in Europe will be deep. For UK holidaymakers the falling Euro will help, though it will be offset and may even be overtaken by the weakening pound as the sickest currency.
Well that’s it. Of course any predictions can look comical in hindsight, but above is what I think is most likely to happen. Do you have any thoughts on the above, or predictions of your own? Please leave them in the comments box on the website, below.