The World in 2014

on Tuesday, 31 December 2013. Posted in
Facebook
Facebook
Google+
Google+
http://www.caterergoodman.com/the-world-in-2014/
LinkedIn
Pinterest
Pinterest
SHARE

Forecasting is difficult, particularly about the future.  Nevertheless, here are some important topics we think will be key to the world economy in 2014.

statue-of-liberty

The United States will continue to recover.  The US budget deal and the new determination by congress to “work together” at least on the most basic and prosaic things like keeping the government running, seems to mean that 2014 will be a good year for the economy.  The financial markets will continue to keep a close on “tapering” but we think the US Federal Reserve has set a trend.  Taper, but keep it gentle.  If CEO’s can understand the trend and start investing and hiring, then the recovery’s strength might surprise many by the second quarter.  The US dollar could surprise on the upside also.

Europe isn’t in recovery yet.  It is merely failing to worsen, which for the moment is enough.  Europe doesn’t look close to imminent collapse or crisis.  The key question is whether for politics is whether anti-Euro parties gain momentum.  If so, then it could mark the beginning of the end for Europe.  The rays of sunshine for Europe have been the gradual reform and improvement in Spain, Portugal and Ireland.  Even Greece has reported strong hiring expectations these days.  If the US and the UK to a lesser extent, can pass on enough demand to Europe, then 2014 could signal the floor for Europe’s recession.  Let’s hope so.

Brazil and India face similar problems with oversized ambition with undersized ability to deliver.  Strangled by red tape and a lack of infrastructure both face a choice another lost year or the opportunity to seek change.  India could be first under the very imperfect Narendra Modi to turn the corner.  Brazil looks further away.  The markets reflect these levels of optimism.

Russia will continue to rail against its slide into irrelevance.  We don’t expect it to lead to external instability.  Internal instability will be more the focus.  Russia faces a hard choice with future gas revenues likely to fall in the face of growing gas supplies, particularly from the United States which will start hitting international markets in 2015.  We doubt they are up to the challenge based on present trends.  We suspect the Sochi games will be remembered like the Empire State Building or Dubai’s Burj Khalifa.  An ill-timed monument to a economic peak that is already on the wane.

xijinpingPicking a dominant trend in China is tricky.  Reform intent seems to exist, although weekly.  Encouragingly SOE’s have been shown warning shots, and the anti-corruption drives seem real, although still politically motivated more often than not.  Political conservatism is real also.  A growing confidence internationally is certainly true and the military also seems less shy than before.   What also seems true is that power has been centralized more than since Deng Xiaoping, so whatever the trends are, and Xi Jinping is certainly the starting point, they are unlikely to go away.

South East Asia and Africa seem to be the forgotten choices in amongst these giants, yet both have more reason for optimism than any outside of perhaps the United States.  Sub-Sahara Africa (well away from the swamp of politics and extremism of the Middle East) has been growing at double digit rates in many places.  The fastest growing countries, outside of Mongolia, are to be found.  Also the stock markets, South Africa aside, are also maturing rapidly.  Mexico also joins the list of forgotten stronger markets.  Mexico is benefiting from the US recovery also.

A few final quick points.  The US market will have a correction next year at some point.  It is not yet expensive, but also it is no longer cheap.  Given the cheap money, it will likely be a buying opportunity.  Japan and China will keep butting heads.  North Korea looks more like a wild-card than ever before.  Kim Jong Un, the North Korean leader, reminds us more and more of King Joffrey from Game of Thrones.  A callous and nervous youth determined to bludgeon his way to respect.  He seems stupid enough to do something insane.  Burma on the other hand looks to be one of the brighter stories of the last few years with openness growing.  Whether Kim Jong Un is listening to this positive example is far from certain.

Facebook
Facebook
Google+
Google+
http://www.caterergoodman.com/the-world-in-2014/
LinkedIn
Pinterest
Pinterest
SHARE
Tags: , , , , , , ,

Leave a Reply

Your email address will not be published. Required fields are marked *


*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>