A very good, very outrageous year
In the US, Trump floundered from one scandal and gaffe to the next, entirely failing to pull any policy levers that impacted markets even as he took personal responsibility for a stellar year in stock markets with record low volatility.
In Asia, China’s desire to keep everything orderly until at least the other side of the Party Congress kept forex traders’ fears of a renminbi devaluation on ice and the economy in reasonable shape even as the country’s dangerous credit bubble inflated further.
In short, with few exceptions, global risk assets enjoyed a very good year with very low volatility – the kind of trading year very few predicted and thus an outrageous one indeed, especially for bears and gold bugs. Who would have thought that, 12 months after the 2016 Election Day earthquake in the US, a classic fear indicator like gold would be near-precisely unchanged!
Our suspicion is that the complacency and low volatility in 2017 will not repeat and may indeed have stored energy for a spectacular and outrageous 2018. Thus, a number of our predictions point squarely at the risk that this accumulation of excess complacency may have blown a pent-up bubble of volatility.
But do keep in mind, as always, that these are not forecasts. Rather, they are a list of supposed “1% likelihood” events that should really be considered as 10% likely… or higher.