What will be the next year like?

End of the year brings balancing and expectations for the following year. I must admit that the year 2016 was surprising to me in a certain aspect. We were correctly expecting the basic economic direction of the world but we got pretty surprised by the development in the politics. When I was reading a year old text yesterday I saw that I was rightly expecting that for the year 2016 the politics will be crucial and that the giant propagandistic campaign will take place but I didn’t seriously think that BREXIT could go through and that D. Trump could become the president of the USA. Only a few weeks before the voting I understood that the election didn’t have to end up like it was generally expected. When it was precisely the politics that influenced the financial markets the most.

The year 2017 will be again about the politics. We will have to observe it way more than the macroeconomic indicators. BREXIT should take place in March. That is a big unknown. Nobody knows how will it exactly happen and what will it bring. At the same time, elections will take place in the Netherlands. The polls are showing that the strongest party will be the one which wants Netherlands to leave the EU. Elections in France will take place in May and it is almost certain that the politician who wants France to leave the EU will advance further. And then the elections in Germany will come up where the AfD is quickly gaining power and wants to leave the EU also. However implausible the vision of the EU breaking apart may seemed recently now it is not as unreal. Is it little uncertainty and instability? Uncertainty never helps the economy.

Economic uncertainties are next to it marginal. ECB keeps pumping money into the economy because the economy is not doing well. The prices of real estate are overheated almost all over the EU because the interest rates are unnaturally low. That’s why the central banks everywhere pulled a break on the mortgages. Global stocks and bonds are overheated. Last growth was crazy. Trump was an enormous stimulus for the stocks. But what is standing behind him? Is it something physical? Does the world know what is Trump really going to do? That is a fertile soil for future disappointments. Moreover, the interest rates will rise in the USA. The growth of the interest rates is not good for the stocks. The companies will have more expensive capital. So the probability of the stocks falling keeps growing. Next to that the European banks still have problems with the capital and bad loans. Capital is flowing away from Italy and Asia on a large scale…