Wednesday, March 21, 2007

Trading Thoughts for 2007

Around the 20th of December, 2006, when I had just started my study of stock markets, I decided to write down my forecast for the salient issues in 2007.

GLOBAL
  • USD to remain weak
  • Low global inflation
  • Money is cheap
  • Slowdown in US, but pick-up in EU + developing economies
  • Oil prices to remain historically high
  • Re-alignment of global economic forces in progress - gold to be a dominant standard again
  • More international takeovers - especially in Africa of minerals
INDIA
  • Strong economy
  • Higher interest rates
  • Moderate inflation - under control
  • More emphasis on infrastructure
AUSTRALIA
  • Australia to sign N-agreement with India
  • Forward/Futures market in Uranium to come into existence
  • Australia to sign Kyoto Protocol - or increase funding for green technology
  • More takeovers in Australia - good year for investment bankers
  • Bad year for banks and insurance - drought, bushfires, economic slowdown
  • Fall in AUD - to reflect fall in resources prices, good year for grain exports, bad year for mining cos. (except Gold)
On reflection, with only slightly more of a clue now, I would add:

Global:
  • Re-emergence of growth in the Japanese economy + easing back (i.e. not a complete 'unwind') of the Yen carry-trade due to a stronger Yen + possible interest rate rises.
  • Money is still cheap - plenty of petro-dollars about, plus HUGE amounts of the USD lying about in China and Japan.
Australia:
  • Strong dollar: due to weakness in USD but combined with demand for resources from strong China - earlier I had believed that the Chinese economy would slow down in tandem with the US economy - I now believe that the growth in the Chinese domestic economy is an even bigger animal about to be unleashed on the world.
  • Weaker profits for Aussie based miners (due to strong A$), except where offset by rising international prices of the underlying commodity (eg. Uranium, rare earths, molybdenum (?))
  • Good year for banks, insurance and mutual funds - more capital inflows into the Aussie market
  • At least 1 more interest rate hike this year
  • Property market - to remain at insane levels. The higher it goes, the harder it will fall.

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