The World in 2014
Posted on December 31, 2013
Forecasting is difficult, particularly about the future. Nevertheless, here are some important topics we think will be key to the world economy in 2014.
The United States will continue to recover. The US budget deal and the new determination by congress to “work together” at least on the most basic and prosaic things like keeping the government running, seems to mean that 2014 will be a good year for the economy. The financial markets will continue to keep a close on “tapering” but we think the US Federal Reserve has set a trend. Taper, but keep it gentle. If CEO’s can understand the trend and start investing and hiring, then the recovery’s strength might surprise many by the second quarter. The US dollar could surprise on the upside also.
Europe isn’t in recovery yet. It is merely failing to worsen, which for the moment is enough. Europe doesn’t look close to imminent collapse or crisis. The key question for politics is whether anti-Euro parties gain momentum. If so, then it could mark the beginning of the end for Europe. The rays of sunshine for Europe have been the gradual reform and improvement in Spain, Portugal and Ireland. Even Greece has reported strong hiring expectations these days. If the US and the UK to a lesser extent, can pass on enough demand to Europe, then 2014 could signal the floor for Europe’s recession. Let’s hope so.
Brazil and India face similar problems with oversized ambition with undersized ability to deliver. Strangled by red tape and a lack of infrastructure both face a choice: another lost year, or the opportunity to seek change. India could be first under the very imperfect Narendra Modi to turn the corner. Brazil looks further away. The markets reflect these levels of optimism.
Russia will continue to rail against its slide into irrelevance. We don’t expect it to lead to external instability. Internal instability will be more the focus. Russia faces a hard choice with future gas revenues likely to fall in the face of growing gas supplies, particularly from the United States which will start hitting international markets in 2015. We doubt they are up to the challenge based on present trends. We suspect the Sochi games will be remembered like the Empire State Building or Dubai’s Burj Khalifa. An ill-timed monument to an economic peak that is already on the wane.
Picking a dominant trend in China is tricky. Reform intent seems to exist, although weekly. Encouragingly SOE’s have been shown warning shots, and the anti-corruption drives seem real, although still politically motivated more often than not. Political conservatism is real also. A growing confidence internationally is certainly true and the military also seems less shy than before. What also seems true is that power has been centralized more than since Deng Xiaoping, so whatever the trends are, and Xi Jinping is certainly the starting point, they are unlikely to go away.
South East Asia and Africa seem to be the forgotten choices in amongst these giants, yet both have more reason for optimism than any outside of perhaps the United States. Sub-Sahara Africa (well away from the swamp of politics and extremism of the Middle East) has been growing at double digit rates in many places. The fastest growing countries, outside of Mongolia, are to be found. Also the stock markets, South Africa aside, are also maturing rapidly. Mexico also joins the list of forgotten stronger markets. Mexico is benefiting from the US recovery also.
A few final quick points. The US market will have a correction next year at some point. It is not yet expensive, but also it is no longer cheap. Given the cheap money, it will likely be a buying opportunity. Japan and China will keep butting heads. North Korea looks more like a wild-card than ever before. Kim Jong Un, the North Korean leader, reminds us more and more of King Joffrey from Game of Thrones. A callous and nervous youth determined to bludgeon his way to respect. He seems stupid enough to do something insane. Burma on the other hand looks to be one of the brighter stories of the last few years with openness growing. Whether Kim Jong Un is listening to this positive example is far from certain.
About Caterer Goodman Partners
Caterer Goodman Partners is a Shanghai based wealth management firm established with a clear vision to provide a new level of personalized financial planning services for expatriates in Asia. Our financial advisors provide guidance for our clients in all areas of investment, specialising in managed accounts, money-market funds, retirement planning and alternative investments. At Caterer Goodman Partners, we offer our advice and experience to provide low cost, tax-effective and simple solutions to match our clients’ interests.
About Owen Caterer
Since graduation Mr Owen Caterer has worked with the Queensland Premier's Department in Trade Facilitation and then as a financial adviser in Shanghai from 2005 until 2010. He then rose to Senior Adviser, then Business Development manager and then to Chief Investment Officer responsible for portfolios to a value of US$280 million across Asia. Following that Mr Caterer left to found his own firm with a partner in the financial advisory and wealth management area. This focused on developing China and Asia's first fee-based financial advisory (rather than commission-based). This has grown to now have 8 staff and and managing almost US$35 million for clients throughout Asia. This business success was recognized as a finalist in the 2013 ACBA in the Start Up Enterprises category and are one of a small number of foreign managed firms to have a full asset management license in China. Owen has also been active in the community volunteering for the Australian Chamber of Commerce in Shanghai and acting as the Vice-Chair of the Small Business Working Group (2012-2014) and as the Co-Deputy Chair of the Financial Services since 2013 until the present. They have continued to grow their business and have now been selected as a small group of companies who are platinum members of the Australian chamber of commerce. The achievement they are most proud of is their efforts to reform the financial planning industry in China and push it away from a hard-sales commission driven model to a more ethical management fee and long term customer service model. Owen has a Graduate Diploma of Applied Finance from the Securities Institute of Australia of which he was a member as a Fellow of Finance for many years and also has an undergraduate degree from Griffith University in International Business. Owen's interests are tennis, running and his wife and two children. He speaks fluent Chinese, first arriving in China in 1997.
Tags: 2014, Caterer Goodman, China Expat Money, Economic outlook, Financial Advisor, Forecast, Investment, Market watch, Owen Caterer, Shanghai
Categorised in: Economic Commentary, Market Flash