Experts Weigh In: Top Financial Market Predictions of 2017

For the financial markets, 2016 will go down as one of the most shocking years in recent memory. Britain’s decision to leave the European Union, Donald Trump’s election victory and the resignation of Italian Prime Minister Matteo Renzi highlighted a year that was filled with drama (and pain, depending on which side of the market you were on). As the year draws to a close, investors are already looking ahead to 2017. Here are seven bold predictions from the experts.

S&P 500 will end at 2,073: Fortune

The staff at Fortune aren’t too impressed with the latest equities rally, which has sent the S&P 500 to multiple record highs on the heels of Donald Trump’s election victory. While the S&P 500 looks to test the upper 2,200 region at the time of writing, Fortune expects the benchmark average may close at 2,073 in 2017. As the post-election rally begins to fade, the stock market will collide with reality as rising interest rates weigh on investor sentiment.[1]

US crude oil to average $51.66 a barrel: EIA

The US Energy Information Administration (EIA) recently upped its forecast for crude oil, but not by as much as you think. The EIA expects US West Texas Intermediate (WTI) futures to average $50.66 a barrel next year.[2] That’s an increase of 1.5% from the previous forecast. This forecast factors in OPEC’s historic deal to curb crude production by 1.2 million barrels per day. However, analysts say this will only encourage greater US shale production, which may offset any effort by OPEC to control supply. Therefore, we should expect any upward momentum in prices to be choppy.

Gold prices to average $1,338 per troy ounce: Credit Suisse

Zurich-based Credit Suisse recently slashed its outlook on gold by $100, reflecting the metal’s recent headwinds tied to a surging US dollar. Analysts at the bank may expect bullion to average $1,338 per troy ounce next year. Gold has plunged by around $140 since the start of November, as US rate-hike jitters and surging equities undercut demand for precious metals.[3]

EUR/USD to hit parity: Goldman Sachs

Goldman Sachs made a bold prediction last month by forecasting the EUR/USD exchange rate to hit 1.00 by the end of 2017. The pair has been rocked in recent weeks by US rate hike speculation. The combination of higher US interest rates, weak Eurozone growth and high profile elections in Germany and France are expected to keep demand for the euro extremely low over the next 12 months.[4] The rise of populist parties in Germany, France, Italy, Austria and elsewhere could lead to a radical shift in European politics, which could further undermine the European Union.

US federal funds rate to rise four times in 2016: The Wall Street Journal

A recent survey of economists by The Wall Street Journal showed the US federal funds rate averaging 1.26% by December 2017.[5] With the Federal Reserve raising interest rates in December 2016, this implies four quarter-point increases in 2017. Incoming President Donald Trump may very well be the strongest case for higher interest rates. The President-elect is expected to implement massive fiscal stimulus and corporate tax cuts, which may lead to faster inflation. The Fed may therefore have to readjust its policy timeline to account for rising cost pressures.

GBP/USD to hit 1.14: Goldman Sachs

For this one, we go back to Goldman Sachs. Last month, the bank said it expects the GBP/USD exchange rate to fall gradually throughout 2017, eventually hitting 1.14.[6] This is a bolder prediction than you think, given the political wrangling surrounding Brexit. A UK High Court ruling last month decided that Prime Minister Theresa May would need parliamentary approval before triggering Article 50 – the so-called Brexit clause that formally kicks off the two-year window for negotiating a new trade agreement with Brussels. Experts argue that invoking British Parliament may leave Brexit dead in its tracks. The pound’s fortunes may get sunnier in the event the Brexit process stalls or fails all together.

US economy to grow more than 2%: IMF, OECD

The US economy has roared back in the second half of the year, and may be expected to maintain a robust growth trend in 2017, according to the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD).[7] Stronger US growth may only feed into rate hike bets. It may also make certain segments of the stock market that are tied to US consumers more attractive.

Although 2017 offers a few reasons to be optimistic, it signals a possible continuation of uncertainty we’ve come to expect. Market prognostication is an extremely difficult chore, so don’t be surprised if many of these predictions end up being changed in a few months.

[1] Matthew Heimer and Anne VanderMey (November 15, 2016). “Prediction: This is Where the S&P 500 Will Finish in 2017.” Fortune.

[2] Myra P. Saefong (December 6, 2016). “EIA ups Brent, WTI oil price forecasts for this year and next.” MarketWatch.

[3] Charles Bovaird (December 8, 2016). ‘Credit Suisse Lowers 2017 Gold Forecast (GLD, IAU).” Investopedia.

[4] Victor Reklaitis (November 29, 2016). “Everything Goldman Sachs predicts for 2017 – in one chart.” MarketWatch.

[5] Colin Lawrence (December 11, 2016). “British Pound To US Dollar Forecast: Technical And Fundamental Outlook for FED Week.” ExchangeRates.org.uk.

[6] Victor Reklaitis (November 29, 2016). “Everything Goldman Sachs predicts for 2017 – in one chart.” MarketWatch.

[7] Matthew Heimer and Anne VanderMey (November 15, 2016). “Prediction: This is Where the S&P 500 Will Finish in 2017.” Fortune.

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