Type to search

Predictions for 2010

GB Geo-Blog

Predictions for 2010

I am going to venture to make some predictions for the coming year. But first let me forewarn my readers that I am not giving any investment advice, and if any of you are foolish enough to make any investments based on my predictions, then I wish you well. But you are entirely responsible for your gains or losses.

First, I am rather bullish on the economic prospects for the United States. I believe that the U.S. economy will grow between 4% and 4.5% this year, outpacing growth rates in Canada – 3.5% (Canada does not have anywhere near as diversified or entrepreneurial economy), and the EU – 2.5% (there is no EU from an economic policy making perspective). The animal spirits, which have long been much more active and aggressive in the U.S., are picking up and this should lead to substantial increases in investment spending.

As the economic growth rate accelerates over the next couple of quarters, the unemployment rate will finally begin to decline. I expect the unemployment rate in the U.S. to be between 8% and 8.5% by year-end. This will not be a jobless recovery. Higher rates of growth and job creation will boost consumer confidence further reinforcing the recovery – positive feedback loop.

Inflationary pressures will not surface this year, so the rate of inflation should hover below 2%. I expect the same inflation performance for Canada. The Fed likely will start increasing short-term interest rates in the second half of the year, as will the Bank of Canada, but they should remain below 2% this year. Long rates however will rise to about 5.5%.

This scenario for the U.S. should deflate the gold bubble. Good news is never good for gold. Gold prices might still rise towards $1,300, but they should be closer to $600 by the end of the year. Oil prices will continue to rise for the next couple of months, possibly topping out over $100. Then they too will follow a sharp path downwards to end up closer to $50 a barrel.s

The drop in commodity prices, as traders begin to realize that China’s growth rate is not as strong as it is reported, and the demand pressures that China will place on commodities will be much weaker than currently anticipated, will further support economic growth in the United States. My expectations for commodity prices in turn leads me to predict that the Canadian dollar will depreciate later this year, possibly ending the year near the $0.85 U.S. level.

The good economic news for the U.S. should translate into very small losses for the Democrats in the mid-term elections. They definitely will not lose control of Congress. In Canada, the relatively solid economic performance should enable the Conservative Government of Prime Minister Harper to win a majority, albeit slim, in either a late spring or early  fall election. In the U.K., Gordon Brown will be looking for new employment by the summer.

As for some odds and ends: I expect the religious leaders in Iran to dump their front man Ahmadinejad, and call for new elections in order to maintain themselves in power. Several countries, outside of Africa, will default on their debt. There will be no successor treaty to Kyoto this year, and the Doha Round will diddle into 2011. The G20 will solve nothing, and agree on very little of real substance. And there will be trade wars with China.

Could I be wrong? Of course. Will I be right? Check back next year.

The opinions expressed in this blog are personal and do not reflect the views of either Global Brief or the Glendon School of Public and International Affairs.


Leave a Comment

Next Up