Zak Mir on What Will (Probably) Happen in 2015

In order to get a “balanced” perspective on the markets, politics and life in general, I tend to read just two websites, The Telegraph and The Guardian. Of course, the Financial Times should also be included in this list.

But historically, apart from the “No FT, No Comment” slogan which was first rate, the House of Pearson has tended to disappoint in being almost as predictable as the Telegraph’s anti-EU stance, or the Guardian’s “tax the evil rich” approach.However, the FT’s Tiger Global revelations regarding Quindell (QPP) and other hedge fund victims was inspired, and we can of course expect more of the hedge fund/paid for “Shock Jock” style bearish research combinations to occur on vulnerable companies whether they deserve it or not. The hedge fund effectively becomes judge and jury. It is clearly a formula that works, preying as it does on the fears of all but the most independent minded market participants, and especially private investors.

On a happier note the latest FT predictions for 2015 were also more high octane than one would normally expect from such a seasonal/space filling exercise.

Given that politics is so close to the financial markets now in the UK, the FT call that the result of the May General Election will be a National Coalition between Conservative and Labour was as good a piece of homework as it was logical, but also feels really left field. The last National Coalition was in the 1930s, and it can be said without too much fear of contradiction that the forces facing the UK in the 2010s are no less momentous than they were 80 years ago. Indeed, it would have been surprising if after the Scotland No vote (due to an embarrassingly one sided media) HM Queen (who was asked to intervene in an unconstitutional manner) did not decide it was safer to let Prince Charles take over. This would be in order not to have a UK breakup occur under her watch. In fact, it could still happen.

The implication of ConLab is that in one manoeuvre it would snuff out the SNP, UKIP and all the other disruptive forces that have characterised politics over the post financial crisis period. In some ways Messrs Salmond and Farage would be rendered victims of their own success, with victory instead being grabbed by the career politicians, with their fat cat lifestyles and Westminster powerbase. Indeed, I have taken the view for decades that the only difference between Brussels and Westminster is that the latter is simply a more efficient and better disguised gravy train. The only plus point is that we are being ripped off by our own directly elected people – not much of a comfort if you think about it.

So the probable scenarios for 2015?

A few seats at Westminster for the SNP and UKIP, but unlike the LibDems, they will not be holding the balance of power. Indeed, after a few years in the limelight it could very well be that Nick Clegg and “anti” Business Secretary Vince Cable are heading for the oblivion which prior to 2010’s election roulette wheel they were always marked for.

On the financial markets, will there be a tumble for equities off the back of rising interest rates?

I am tipped towards the idea that ultra dove Janet Yellen simply will not be able to press the button. Since the time of the Bernanke induced Taper Tantrum the Federal Reserve has stepped in every time the stock market has dipped to say that they will hold fire on tighter money. I just do not think the Fed – or indeed the Bank of England here – have the guts to raise interest rates in a meaningful way. Ironically, if the U.S. Dollar continues to strengthen in as virulent a way as it has in recent months, the next move on rates Stateside could be lower not higher.

Onto stocks…

Conventional thinking has it that the FTSE 100 is doomed to underperform due to its coterie of mining and oil & gas plays. This may be partly true, but there are certainly more benefits to cheaper commodities over all. Another year in the 6,000 – 7,000 zone looks to be the worst case scenario on offer. It is easier to be bearish on the U.S. But the transformation offered there by the likes of Apple (AAPL), Google (GOOG) and the new economy really makes it appear that while a 10% correction could be offered along the way, to assume a lasting downside may be the strategy which means you will miss out in 2015 in the same way as you would have by being a bear in 2014.

Finally, gold, a big winner in 2015?

If Japan ever gets inflation back into its economy I would change my tack on gold. In the meantime, it is probably best to avoid the metal unless or until it really starts to soar even if you miss the first 10% of any rally. Too many fingers have been burned since the peak in 2011. There is little point being part of that frustrated and by now impoverished crowd.