“The horse is here to stay, but the automobile is only a fad,” the president of the Michigan Savings Bank told Henry Ford’s lawyer in 1903, advising him not to put any money into his client’s new-fangled technology. Examples like that should discourage any of us from making predictions, especially where business and the markets are concerned.
Still, it is worth thinking about what might catch us out in the next 12 months — just as the sudden drop in the oil price CLG5, -2.17% did this year. There are plenty of things that everyone thinks will happen in 2015. The Fed will modestly raise interest rates. The Greek debt crisis will flare up again. Vladimir Putin will do something stupidly aggressive. All that is already in the price. But here are seven surprises for the year ahead.
A Spanish Revolution: Everyone is fretting about political turmoil plunging the eurozone back into crisis. But the country they should really be worrying about is Spain.
A general election will be held before December and the ruling center-right People’s Party has little chance of clinging onto power. The newly-formed radical Podemos — in a nod to Barack Obama, it is Spanish for “We Can” — has surged in the polls. Some even put it in the lead. Whether it can secure power remains to be seen, but it is certainly a force to be reckoned with.
Podemos wants to stay in the euro EURUSD, +0.25% , but overthow German-imposed austerity. Along with a restructuring of Spain’s debts, it wants a 35-hour week, and a lower retirement age. Spain has always been the country most likely to rebel against the single currency. Unlike Greece, its economy is successful enough to survive perfectly well on its own, and its recovery this year will only embolden it further. A Podemos victory, though, would throw the bond markets into panic, and rightly so.
The ECB Buys Dollars: Everyone expects the European Central Banks to launch some form of quantitative easing this year. With the continent sliding into deflation, it has little option. But there is still little agreement about what assets it should buy with the money it prints. Government bonds, like the British or American central banks? That looks like subsidizing feckless peripheral governments. Equities? That looks like stoking a bubble and helping the rich.
In fact, the easiest option is to wade into the currency market and buy dollars DXY, -0.17% . It creates money, and it will also drive down the euro — making life easier for hard-pressed manufacturers. True, the U.S. won’t like it, but with a lame-duck president cruising towards retirement, no one will worry about that.
Shell RDS.B, +0.37% Launches A Bid For BP BP, +0.05% : A merger between the two heavyweights of the European oil industry has been a favorite stock-market rumor for years. It has been discussed in the past but 2015 will be the year it actually happens.
BP has never really recovered from the Gulf of Mexico catastrophe. Both companies are going to struggle with oil at $50 a barrel (and perhaps even less by the summer). But they can do what big multinationals can always do when they are in a hole. Merge, cut costs and keep profits flowing by eliminating waste.
The ‘Near-Abroad’ Collapses: Russian President Vladimir Putin likes to refer to the countries that used to be part of the Soviet Empire as the “near abroad,” including countries such as Belarus, Georgia, and Kyrgyzstan. Most of them were kept within the Russian orbit by a mixture of bullying and bribes. But both of those depended critically on money. With the Kremlin running out of easy oil money, it won’t have the cash for either. A currency crisis is already under way in Belarus, and that will spread to other states as well.
Like the Arab Spring of 2011, expect a wave of revolts, as countries throw off Russian domination and look to establish their own place in the world.
Peace in Syria: The civil war in Syria has already raged for three years now, taking a huge toll in civilian casualties and creating the murderous Islamic State. But a falling oil price means that many of President Bashar al-Assad’s staunchest supporters, such as Iran and Russia, will be under intense pressure themselves. They won’t be in any state to prop up his regime any more.
If Assad is quietly (or noisily) removed from the equation, a cease-fire will be possible between the different factions, and a new government will have a chance to restore order to the country. That will be good for all the Middle Eastern markets, while also leading to more supply in an already flooded oil market.
Chinese Tech Mania: We have already seen the frenzied initial public offering of Alibaba BABA, -2.99% . But the are plenty more where that came from. Venture capital investments in China almost tripled in the first three-quarters of the year, from $3.5 billion to $8.1 billion, according to Ernst & Young. With the Chinese stock market already surging, many of those will opt for accelerated floatations, just as they did in the dot-com bubble of the last decade.
It doesn’t take much for the stock market to kickstart a tech bubble, and the combination of China and the Internet will have money managers around the world throwing money at every 20-something with an office in Hangzhou — China’s Silicon Valley — and a bright idea. No doubt it will end in tears — but until then it will be a heck of a ride.
Old Technologies Make a Comeback: Vinyl is already rocking again, as a new generation of music lovers discover the pleasures of 12-inches of black plastic and colorful gatefold sleeves. But that is not the only technology that could be set for a revival.
The typewriter forced people to write slowly, and actually think about what they were saying, because it was so much hassle to change things afterwards. There are plenty of offices where making that compulsory might be an improvement. Canals are a cheap and clean way of getting stuff around, so long as you aren’t in a big hurry — and in most of Europe they go from city center to city center. They are due for a revival.
And how about a phone that you can actually speak into? One with a wire that plugs into the wall, and a device for dialling on the front. Now that really would have something to be said for it.