Cebr’s Top Ten for 2018: sadly the chances of a serious confrontation that could turn nuclear are rising. If we can avoid that, other interesting possibilities are a Bitcoin collapse; impeachment proceedings v Trump; a booming US economy; the UK jogging along; and India’s first Test series victory in England since 1986.
It’s time for our annual look ahead to see what the New Year will bring.
First – how did we do last year? Jeremy Clarkson dismissing New Year predictions on 31 December said ‘as nobody at all predicted Catalonia decided it wanted to break free’ making our headline a year ago ‘Cebr’s top ten for 2017 includes a new country in Cataluña’ seem prophetic!
WHAT WE GOT RIGHT – A British General Election with Corbyn doing better than expected; a UK rate rise; London falling back relatively; a strong world economy; an independence vote in Cataluña; a slowing UK economy and slowing house price growth; and five out of our nine sporting predictions. WHAT WE GOT WRONG – four of our sporting predictions; a falling euro; a falling equity market; and although the UK economy and housing market did slow, they both did so by less than we had expected. I think it would be fair to score us 6 or 7 out of 10 which, given that we deliberately chance our arms in these predictions, is a reasonable result.
What about 2018?
1) The Arab Israeli dispute may be winding down at the expense of the Palestinians. But we are getting closer to another serious war somewhere in the world which could go nuclear. The Middle East and Korea will continue to frighten us and there is always a risk of miscalculation. India and Pakistan can generally be relied upon to provide some excitement. Meanwhile Putin must be aware of Russia’s increasing economic unimportance when energy prices start to weaken and the country’s failure to attract inward investment impedes diversification. Will he try one last throw of the dice, perhaps in the Baltic States.
2) World economy. There is lots of momentum and the fiscal boost in the US should offset continued monetary tightening. India is likely to bounce back, South East Asia is on a roll, China may slow but official figures will say the opposite. Europe is in cyclical upswing as is Latin America. So expect continued growth. We might yet get a hard landing but 2018 doesn’t seem the year (other than if driven by 1) above)
3) World politics. The Italian General Election, to be held on 4 March, is likely to be the most interesting. But unless Italians change their tune it still seems most likely that they will stay in the euro. The mid terms in the US are likely to be the most partisan ever and should determine whether President Trump is impeached. This is a serious risk for him because he seems to lack much sense of self preservation.
4) As a form of money Bitcoin is a scam. It is backed by nothing but a computer algorithm and a mysterious Japanese sounding name. But there is no reason why private money shouldn’t exist though it does make monetary management more difficult and we expect Central Banks to bring in their own cryptocurrencies. At some point Bitcoin will get too big for its own good and, like the Chinese and the Koreans, other central banks will ban it. This might well happen in 2018 which would cause bitcoin ‘investors’ to lose their shirts.
5) UK growth should be fairly similar to this year – above 1% and below 2%. Probably near the top of the range after the inevitable data updates.
6) The most welcome news for 2018 (although it won’t be published until Nov 2019) is that it is likely there has been a dramatic improvement in the UK’s relative educational performance as measured in the 2018 PISA rankings by the OECD. The essentially bipartisan education policies in England promoted by Lord Adonis before he got bit by the Brexit bug and Schools Minister Nick Gibb seem to be starting to work in improving school results, while lack of funding and excessive unionisation in Continental Europe, Wales and Scotland is having the opposite effect, This is much more important for the UK’s economic future than pretty well anything else discussed by economists.
7) Stock markets should be surprisingly volatile for a fairly steady economic scenario. This will reflect the tension between expansionary fiscal policy and contractionary monetary policy. But equity markets will be sustained by the difficulty in achieving value in any other investment category.
8) Theresa May is likely to survive the year as PM. She is heading for a soft Brexit which will enrage the headbangers on both sides. Hopefully Brexit fatigue will kick in this year and we can get back to trying to bring the country together and curing those whom Brexit has made mad on both sides.
9) Income inequality is likely to start rising again after falling on many measures during the past decade. The growth in inequality within countries pre-financial crisis was largely driven by the side effects of globalisation. The renewed rise in inequality will be caused mainly by technology as robots and AI knock out less skilled jobs.
10) Now for our infamous sporting predictions. 2018 is a soccer world cup year and although many teams could win. Brazil seems most likely. Southgate if he has any sense will bring in England’s high performing youngsters to accompany Harry Kane and might well surprise everyone by reaching the semis. It will be hard for England not to win the rugby 6 Nations given that their hardest fixtures will be at home. But the Calcutta Cup match at Murrayfield might spring a surprise. The most hyped match of the year will be England v the All Blacks on 10 Nov which will probably determine the number one ranking in the game. Manchester City have already just about won the Premier League playing the best soccer I have ever seen. Despite the difficulty of playing good football on the soggy late winter pitches there is no need for predictions there then. In cricket the interesting series is likely to be India’s visit to England. India last won a series in England in 1986 and despite being the best team in the world are notoriously bad travellers. But this team seems to be determined to move out of its comfort zone with the best bowler in the world, offspinner Ashwin, deciding to try leg breaks. I think they will beat an England team who might well still be missing Ben Stokes.
And finally may we wish all our readers a happy and enjoyable 2018. If they are successful too, that will be a bonus. For Cebr it will be a very special year for us as we reach our 25th birthday in March. Please wish us luck for the next 25 years.
Douglas McWilliams
dmcwilliams@cebr.com
07710 083 652