How’d We Do Last Year?
Since I’m taking over crystal ball duties from TM this year, I figured I’d take a look back at his predictions from 2013. Unlike the talking heads on TV we like to hold up our record and be accountable. Overall, I’d say TM did pretty well last year:
1) The USA Economy Will Continue to Surpass Expectations
Most of the talking heads on the tube claim that the USA is supposed to grow around 2-2.3% in 2013. I made the mistake of underestimating the recovery last year, and I won’t repeat that error. I believe the USA economy will end the year with GDP up 2.7-3% (after an initially rocky start). Jobs growth in multiple sectors, wars winding down, and a little more stability will also bring unemployment below 7%. While China and the other BRICS countries might be gaining more relative importance, it is still the American economic machine that is responsible for turning the world’s markets.
As this article goes to press, results for the fiscal 4th quarter of the USA have not yet been announced. The first quarter saw a 1.8% rise in GDP, and second quarter clocked in at 2.5%, and in a late surge the USA realized a 3.6% growth of their GDP for the third quarter of 2013. Most estimates for the fourth quarter make this prediction look good. The unemployment prediction was recently proved correct as well. Looks like TM was dialed in to the USA on this one.
2) Political Gridlock Will Continue to be the Main Drag on the Stars and Stripes
The housing market is up, businesses are more competitive, and sentiment is gradually improving, so what could keep Uncle Sam down – only itself of course. It’s absolutely amazing to be how these legislators and the extremists that control the USA political system have been able to grind the country to a halt the past couple of years. Without getting too partisan, I’ll leave it at the idea that there is plenty of blame to go around. The fact that I find the most interesting (and telling) about American politics right now is that while the approval rating for congress as a whole is terrible and in the single digits most of the time, approval ratings for “your” congressman/congresswoman are still quite high. Which number do you think matters more to the guys/gals in charge? With the vast majority of representatives facing more serious threats from their own side of the aisle in primary races than in the general elections, I don’t really see how they stop this trend. When you add in the continuing huge influence of money and lobbyists within the system, it all looks even more bleak. I believe that when either side says they want compromise, what it really means is, “I want the other guys to come 90% of the way to my position.” For many reasons this continues to be the biggest factor holding the USA back.
I don’t know how much credit someone should get for making this obvious prediction, but it certainly came true. The government shutdown in the USA begs the question – what would this recovery look like if the country wasn’t so busy pulling in opposite directions?
3) Canada Will Continue to Tick Along
Sure, our treasured natural resources might be losing a little value right now, but Canada has several other things to feel good about. The housing market remains pretty robust outside of Toronto and Vancouver, the Keystone XL pipeline will almost assuredly be approved now that electoral posturing is over with (now if only we could get that Northern Gateway one going), and our banks are still the envy of the world. On top of all of these advantages Canada is currently enjoying the relative calm of a majority government that has proven to be a pretty good economic steward regardless of how you feel about their other policies. While the TSX won’t blow away the world in 2013, I believe that steady growth slightly below that of our big trading partners (in the 1-1.5% range) is in order. The best news for us indebted Gen Y’ers is that interest rates will remain untouched until 2014 due to American policies and low inflation numbers (somehow we will have to learn to survive without our economic rockstar – Mr. Carney).
The housing market continues to tick along much to the amazement of forecasters everywhere. Interest rates remained untouched as predicted, and consequently, another year of low mortgages and car payments was in order. The TSX muddled along, and our GDP is likely to come in around 1.5-1.6% for the year. Not too shabby. The major shortfall on domestic issues comes with the pipeline prediction. While rail transport of oil continues to explode, it doesn’t appear that there is any guarantee that pipelines will become a reality. There are incredible powerful lobbies on both sides of this equation and I don’t know who wins.
Result: Better than your average fortune cookie.
4) MERs Will Continue to Get Slashed – Much to the Chagrin of the Financial Sector
By far our most popular and commented on articles in 2012 had to with Investor’s Group, and the broader issue of compensation for financial advice (well, that and the wedding ones anyway). With index-based investing and couch potato portfolios gaining in popularity, mutual fund providers will have no choice but to cut costs in order to appeal to fee-conscious investors. This is especially true for Canadians who have the most to gain from falling MERs, and with Vanguard moving in, these savings are almost a guarantee.
As an index investing advocate I was very happy to see this prediction come true. While an avalanche of financial products now seek to call themselves “ETFs” so that they too can be “hip”, the basic index ETF options available to Canadians have improved due to Vanguard-fueled competition. Three Cheers!
Result: We should be charging for this stuff!
5) Fossil Fuel Prices Fall
Blah Blah, Peak Oil Blah Blah. That pretty much sums up the conventional thinking on fossil fuel dependence over the last few decades. Yes, one day we will run out of liquid gold and that will mean many things – but that day is definitely not today or tomorrow. Several of my friends in the world of geology tell me that all the recent research coming in on fracking reveals that it is relatively safe and almost assuredly does not produce earthquakes of any kind, nor does it directly pollute groundwater. With the recent developments all over North America, a return to relatively cheap oil and natural gas looks to be around for a while.
Prices didn’t fall much, but they didn’t rise either. Crude markets were pretty consistent all year and prices at the pumps are relatively close to what they were last January across most of North America. All the same, the principle of the supply side of the oil ledger looking good for the short-term was confirmed. Mediocre prediction.
Results: Everyone gets a mulligan once in a while right?
6) The NHL Lockout Cancels Season…
Suckers Fans Come Back Anyway
I recently wrote a rant/article about this situation that is worth reading if you’re a hockey fan, or just confused by this whole mess. Hockey players are pretty unique in the world of professional athletics (I like to think this is a result of our wacky Canadian influence) and if you back them into a corner they will make huge sacrifices in the name of pride. Many of the owners couldn’t care less about their hockey teams since they are glorified hood ornaments for billionaires and consequently it is the fans that get to suffer – but only because they allow themselves to. The only reason these guys are still fighting is that they are calculating that all of us will be crazy enough to come back and buy their product again like we did after the last lockout. Not this former fan. I’ll stick to watching the World Junior Tournament, international hockey, college/junior hockey, local high school games, and maybe JUST the Stanley Cup Finals to get my hockey fix. Please take note of this advertisers.
Result: Wrong before the article was even printed. Is that a gong I’m hearing…
7) The Heat, Blue Jays, and Patriots Will Be The Teams of 2013
Lebron is historically good, and with him at power forward the Heat are able to reach a level that no one else can touch right now. The Patriots are another predictable pick, and admittedly one that is heavily influenced by my fan bias (aka bromance with Tom Brady). Their experience and focus on execution will propel them into the history books. Finally, in all of my patriotic pride I am jumping on the Blue Jay’s bandwagon for the first time in years. I know that teams put together through free agency rarely win championships their first year together, but this rotation and lineup, as well as the fact that their division actually appears winnable for once, makes me think this is the year for our team! Joe Carter forever!
While betting on Lebron wasn’t the dumbest idea, the Blue Jay prediction reveals a huge Canadian bias. The Pats didn’t completely embarrass themselves in 2013 and their long-term dominance remains the golden standard in the salary-cap era, but they certainly weren’t “The Team” of the NFL.
Result: Ok, let’s hope you clicked away after the first few…
8) The S&P 500 Breaks All-Time Highs in 2013
The last time the S&P 500 broke 1,575 was in 2007. That ceiling will be pushed through in 2013. For all of the reasons I listed above, the American economy will do just fine. I actually see potential for a major rally if congress were to work together and get a long term deal done that seen several compromises made, including entitlements, tax bases, and simplification of the tax code. Of course in theory there is is potential for pigs to fly as well, so as vague predictions go I’ll temper my expectations and say that the index finishes right around 1600 in 2013.
So much for 1600… Believe it or not, that was a pretty aggressive prediction at the time. In January of 2013 many pundits were calling for the dreaded double dip and all manner of other apocalypses. This happened with none of the “working together” stuff occurring by the way.
Result: The roof got raised slightly higher than we thought.
9) Young and Thrifty Continues to be a Trend-Setter and Leader in Personal Finance.
We released a book, created a podcast, and helped thousands of Gen Yers – I’d call that a pretty good trend to set!
Stay tuned for our look at 2014!