What Will 2016 Bring?

It is important to document one’s view of the future as it is a test of understanding and the weighting of current events – especially economic forecasts. I say current events because the economy does not turn on a dime, and current events should be the drivers for the first six months of 2016.

After re-reading my “forecast” of 2015,  it seems I did reasonably well – with only my uncertainty of low oil prices continuing being “slightly” off base. The conclusion of my crystal ball last year:

There is always uncertainty about the future – and the weighting of the uncertainty is problematic in making predictions. It seems most uncertainty is over-weighted, and ends up having little effect on the economy. But we are NOT talking about the economy here, but the markets and business cycles (which are related but not joined at the hips).

I see oil prices as the major uncertainty for 2015 followed closely by the relative strength of the US dollar and the slowing of the global economies. This is a war in the USA between the benefits and the damage which will be inflicted by these dynamics.

As it turned out, the USA ended 2015 with anemic growth, low oil prices, a strong dollar, weak global growth. The question for 2016 is what will change? 

As there is little movement in the current trend-lines, one should draw the conclusion that the first half of 2016 will be similar to the last half of 2015. This means continues slowing rate of employment growth, continuing low energy prices, soft industrial production, consumer income growth continuing to outpace consumer spending and soft global growth – all indicating USA GDP growth remaining around 2.5 %.

So the uncertainty is the second half of 2016.