2017 has been a very successful year for investors and traders. Stock markets in most developed countries have had major double-digit growth. Investors in cryptocurrencies have seen their positions grow exponentially. Traders in commodities had mixed results with palladium being the biggest winner.
Here are my 5 predictions for the coming year.
Dollar Strength in the First part of the Year
Like commodities, moves on currencies are attributed to demand and supply. Higher demand leads to higher prices.
Before Christmas, Donald Trump signed the tax cuts and jobs act. Part of the act is to reduce the corporate tax from 35% to a low of 21%. This means that companies will be able to bring back their foreign profits at a 21% rate, instead of the 35%. Some expect this process to start within the first part of the year and it could bring more than $1 trillion. As a result, this could lead to significant demand for the dollar which may lead to a gain.
In the past three years, the Euro has been weighed down by several factors. In 2015, the talk was all about Grexit and in 2016 it was about Brexit. This year, while the Euro has been strong, it has been weighed down by elections in France, UK, and Germany, and the crisis in Spain.
In the coming year, there will be no major elections in the region and Draaghi plans to continue his stimulus package until September. The Euro may continue being strong as the European economies focus on growth.
Platinum to overtake Palladium
This year, palladium was the best-performing precious metal having gained more than 40%. On the other hand, its ‘cousin’ platinum has had a flat year with prices ranging between $1036 and $876. In the coming year, we may see momentum in the platinum market.
For starters, platinum and palladium are similar metals mostly used in vehicle manufacturing. The rise in palladium happened as vehicle manufacturers abandoned platinum which had become more expensive. Now, things have changed and palladium has become more expensive. In the coming year, we may see the demand for platinum to rise which will potentially lead to a higher price.
Stock Markets Lose Momentum
As mentioned, the stock markets have seen major gains this year. The reason behind this is the anticipated tax reform program by the United States. This has already happened. In the coming year, investors will have limited to look out for. Remember, investors are known to always buy the rumors and sell the news and vice versa. Therefore, the momentum in the stock market may drop.
Gold to Rise
As rates increase gaining momentum, and as Americans start seeing the benefit of the tax reform, and as the volatility in the cryptocurrencies market continue to rise, gold may continue rising. This year, gold rose by about 10%. It was weighed down by low volatility and complacency in the market as investors ignored key risks. These risks, especially in the Middle East and in the Korean peninsula could continue to unravel in the New Year. This could lead to a higher gold price.
Investors will continue to watch out for the price of cryptocurrencies. I expect them to continue being volatile, and while some expect them to crash, I expect them to end the year at a high.