1. The GDP of the U.S. will drop from 2.4% last year, to only 1.4% this year and 2.1% next year. Both Japan and the Euro area will continue to grow at last year’s pace for both this year and next. This suggests we are in the middle of a “growth” recession but not a “real” recession. (A growth recession is simply a slowdown in the rate of growth but not an actual contraction.)
2. Over the next twelve months, the U.S. stock market will appreciate a mere 2%, compared to 9% in Europe and a whopping 16% in Japan.
3. Interest rates (10-year Treasuries) will increase from 1.8% to 2.9% over that same period, over twice as much as the increase in interest rates in Japan and Europe. (This would be bad news for U.S. bondholders, but I don’t expect rates to rise that much.)
4. The dollar will gain 4% against the pound and 16% against the euro but lose 20% against the Japanese yen.
5. Oil will gain 30% in value over the next twelve months, while gold will lose 21%.
There was also an interesting discussion, explaining the difference between millennials and baby-boomers. We senior citizens buy fancy possessions for status among each other, while millennials buy fancy experiences for the same reason. “Experiences could mean anything from a great weekend trip to a good education, running a marathon to a selfie with a celebrity. Experiences tend to be more unique and hence more likely to be shown off in front of friends.”
Is it time to sell the Mercedes and take a vacation . . . or just get a face-lift?