Investment Chart Kondratiev Wave

Investment Chart Kondratiev Wave

Thursday 3 January 2013

10 forecasts for 2013

The intention is to give forecasts for possible trends that are underestimated by the market according to us.




1. After a weak H1 US economic growth will surprise to the upside (3%+). 3.5-4% growth in 2014 very well possible.

2. According to expected QE and the president cycle of the last three decades the S&P500 should rise to 1620-1650. This could very well be the case even while the market will be more volatile than in 2012 with the possibility of a nasty shock that could bring a correction of more than 10-15%.

3. Spain could surprise to the upside later in 2013. France not becoming the disaster as many are saying. Portugal could very well be a big new worry in Europe.

4. Fight the FED. After some time the FED could very well become under pressure because of too much QE without (horrible) exit scenario. After H1 core inflation could start to rise because of higher unit labour costs and higher rents. The market will fear that inflation will be earlier than 2015 above 2.5% and earlier than unemployment below 6.5%.

5. Japan will see its reverse Volcker moment: deflation will turn into inflation and after 2014 in too much inflation. Initially this will be seen as good news for Japanese equities and bad news for the yen.

6. Emerging Markets the place to be for equities in 2013. Confidence is returning in China. Brazil and India will surprise to the upside. Inflation will not be a problem in most countries causing more monetary easing by central banks.

7. UK credit rating to be downgraded. AAA rated government bonds to become more scarce (less AAA rated governments and declining deficits of AAA countries).

8. Credits will suffer from more downgrades and defaults than in 2012. Inflows from investors will go down and demand from borrowers up. This contrasts with 7.

9. The deflationary thinking since the credit crisis will move to inflationary thinking. This means the correlation between equities and government bonds will become clearly less negative, maybe about zero. (=The FED model could come back as good indicator for equities in 2014).

10. The Great Transition from lower and lower long term bond yields (1981-2012) to decade(s) of higher and higher bond yields will start. 30 year euro zone swap yield to go up above 2.7%, maybe above 3%. 30 year bond yields in US to go to 4%.

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