We are not fortune tellers or prophets, but for some reason every year at the end of December we feel compelled to look ahead and try to see just over the horizon. Here are our predictions for 2008. I hope you will let us know what you think and share with us your predictions.
1. We predict that Hillary Clinton will win the Democratic nomination, and Governor Mitt Romney will win the Republican nomination. The general election is still too close to call. Governor Mike Huckabee may win Iowa, but the big story will be how close Governor Romney is to him and how Hillary lost it. Iowa will be Huckabee’s high point and Hillary’s low point. If Rudy Giuliani comes back to win Republican primaries in New York, California and Florida then he can make a race out of it, but a Romney win in South Carolina, Michigan and Nevada could create momentum too great to counteract. With a Hillary vs. Romney showdown in the offing, Mayor Michael Bloomberg will have trouble staying out of the race. Bloomberg will doom the Hillary campaign the same way Ross Perot hurt the elder President George Bush.
2. America’s media are currently predicting that we will fall into recession in early 2008. We just don’t see it happening. Housing is already in recession, but it is at its low and will not head much lower. The de-leveraging of financial assets has mostly happened and stocks are already priced for recession. Earnings will not fall as far as past slowdowns because profits from abroad are boosting America’s companies.
3. Oil prices will moderate in 2008. When we say moderate, we mean 60 to 70 dollars a barrel in the late winter and spring of 2008. We expect that if a recession doesn’t show up and global growth continues, oil and gold will both head higher in the fall of 2008. If Hillary Clinton is somehow elected, expect the gold market in particular to enter a new supercharged bull phase. This will be a repeat of the bull market in gold that came after the inauguration of Bill Clinton in 1993 and didn’t stop until Newt Gingrich was elected Speaker of the House of Representatives on January 4, 1995.
4. The dollar will go up in value in 2008. With the economy remaining strong, the Federal Reserve will once again begin to focus on fighting inflation in 2008. When the Fed changes direction and starts to raise interest rates then we will see the start of a new bull market for the greenback. The dollar still has happy days ahead. But longer term inflation will win the battle and return.