It’s more or less obligatory at this time of year for financial columnists and bloggers to present their predictions for the coming year. Not wanting to be left out, here are mine, for what they’re worth:
Interest rates will moderate and rise gradually – repeat, gradually – throughout the year, not spiking sharply as they did in the second half of 2016. The yield on the 10-year Treasury note, now at about 2.50%, will end 2017 at about 3.0%, although it may rise as high as 3.5% sometime during the year before settling back down again.
U.S. stocks will rise about 5% for the year. Sorry, folks, the easy money was already made in 2016. But that’s better than long-term bonds, which will either lose money or just about break even (see the previous paragraph).
The Federal Reserve will now put into action the policy it promised back at the end of 2015, namely raising short-term interest rates 25 basis points per quarter – not three as it indicated in its December post-meeting announcement. The Fed will be far less restrained in making monetary policy decisions in 2017. No more erring on the side of caution under Trump...
But then there will be less need to, as GDP will average 3% growth in 2017.
Janet Yellen will remain Fed chairman at least until her term expires in February 2018. Relations between Trump and Yellen will improve.
Congress will pass legislation that requires greater openness on Fed deliberations, including auditing by Congress, but it will stop short of infringing significantly on Fed decision-making.
Rising interest rates will sharply decrease mortgage refinances. But it should be a pretty decent year for home purchases. House prices are likely to moderate as more supply of new homes comes on stream. The rollback of federal regulations will be a boon to lenders and borrowers. Having the most famous real estate developer in the world as president can’t but help the housing market.
Treasury Secretary Steven Mnuchin, the former owner of a nonprime mortgage lender, will lead an effort to expand lending opportunities for people who have been shut off the market for the past eight years.
The Republican Congress will roll back significant portions of the Dodd-Frank Act, especially those that hinder lenders from making loans to legitimately qualified borrowers. However, it will retain the Consumer Financial Protection Bureau, although Trump will replace the current director, Richard Cordray. The Wells Fargo phony accounts scandal shows that the CFPB is necessary to protect consumers. On this issue Elizabeth Warren is right.
Global energy prices will weaken as the Trump administration announces new incentives to promote domestic oil production and threatens to cut off oil imports from the Middle East. As always, OPEC members will cheat on their recent pledge to limit production, further keeping prices modest. Oil prices will average $50 a barrel or lower.
The best performing stock market in 2017 will be Russia, as the U.S. seeks common ground with Vladimir Putin on issues that concern both countries, notably terrorism and energy. Donald Trump will reach a landmark deal in which the U.S. will purchase discounted oil from Russia, giving Putin a reliable market for his oil and the U.S. a dependable price.
European markets will go into panic as Italy threatens to leave the euro zone. The euro will fall below parity with the U.S. dollar.
The U.S. economy will improve throughout the year, but the mainstream media will give Trump’s policies, or the anticipation of them – absolutely no credit. The media mantra will be that Trump inherited an economy that was about to blossom thanks to Obama’s policies.
President Trump will unveil a new, less-convoluted hairstyle sometime during the year. Financial markets will temporarily freeze as investors and traders try to figure out what it means. Making matters worse, the president refuses to discuss the matter, acting as if nothing is amiss.
The Democrat National Committee will blame Trump’s victory on global warming/climate change and demand a national recount.
Construction will begin on Trump’s wall with Mexico. The wall isn’t exactly a wall, however, it’s more like a fence, which has the Washington press corps up in arms demanding to know why Trump has reneged on one of his most famous campaign pledges.
The Cleveland Indians will avenge their loss in the World Series, defeating the Chicago Cubs in six games.
The New York Giants will win the Super Bowl, defeating the New England Patriots.
President Trump will name Senator Ted Cruz to the U.S. Supreme Court, taking him out of the running for the Republican presidential nomination in 2020.
Michelle Obama will join “The View” and run for the Senate in Illinois. President Obama will sign on as a commentator with one of the major networks – no, not Fox – to offer his opinion on how bad Trump is doing throughout the year, although he’ll do it in a nice way.
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INO.com Contributor - Fed & Interest Rates
Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.