In today’s Outside the Box we’ll continue with our traditional New Year’s forecasting theme, but we’ll look to a couple of European voices – or I guess, especially considering the Brexit vote, I should just call them English voices.

Ambrose Evans-Pritchard, writing in the London Telegraph, see a rather less optimistic 2017 than the one I’m hoping for, but we have to acknowledge that he may be correct. His title pretty much says it all: “Trump, interest rates and Chinese panic: Why euphoria could turn to a credit crunch in 2017”; and his view back across the pond at us has him seriously squinting:

Donald Trump's reflation rally will short-circuit. Rising borrowing costs will blow fuses across the world before fiscal stimulus arrives, if it in fact arrives.

By the end of 2017 it will be clear that nothing has changed for the better. Powerful deflationary forces retain an invisible grip over the global economy. Bond yields will ratchet up further and then come clattering down again – ultimately driving 10-year US yields below zero before the decade is over.

There are few ‘shovel ready’ projects for Trump’s infrastructure blitz. The headline figures are imaginary. His plan will be whittled down by Congress.

And he goes on. Without attempting to issue any sort of a corrective to his pessimism about our chances this year – we are, after all trying hard to stay outside the box in this letter – I’ll just move on to introduce you (and to re-introduce most of you) to our second… Continental voice, my good friend Niels Jensen of Absolute Return Partners in London. (Note: Niels was born in Denmark but has been in London in the money business for 25 years and is one of the most astute observers of markets that I know.)

Niels isn’t particularly sanguine about 2017, either – you’d have to be a pretty foolish investor to be comfortable with the coming year – but he does lead off with what he variously terms “a flicker of good news,” “a glimmer of hope,” and “a twinkle of optimism.” Take your pick. What it amounts to is that it appears the post-Great Recession collapse of “discorrelation” among risk assets that has so plagued us all is finally appearing to reverse! He points as evidence to a precipitous fall over the past six months in the correlation between the S&P Index and S&P sectors. Here, let me pluck a chart out of his piece and show you:



Nice, huh? And now back to the future bad news. You’ll find quite a bit of overlap between Ambrose’s and Niels’s worries for 2017, but also some intriguing differences. So now, let me get out of their way and let them give the New Year their best shot. And I remain convinced that, however things develop in our political and economic spheres, we can all achieve some personal bests in 2017.

You have a great week, and in a few days I’ll send my own 2017 forecast.

Your hopeful but watchful analyst.