Letter from the Editor
When people ask Breakingviews editors how our past predictions panned out, we have a simple response: “We nailed a few, missed a couple – but they were all interesting.” Consider that the guiding philosophy for our annual attempt at agenda-setting financial foresight.
We do expect to get a few key prognostications right. A year ago we argued that U.S. stocks would best the rest of the world. Bingo. We said central banks would need to fight to retain their independence from politicians. Look no further than the summer’s public tussle over who should lead the U.S. Federal Reserve. We also predicted the Japanese yen would crest above the three-digit mark against the dollar: domo arigato Kuroda-san.
Not all of our views hit the mark. Goldman Sachs, JPMorgan and Credit Suisse are still led by chief executives whose tenures we thought might come to an end in 2013. George Osborne still reigns as the UK’s chancellor of the exchequer despite our skepticism a year ago. And while we predicted a great American newspaper would change hands in 2013, we should have opted for the Washington Post, which was sold to Amazon founder Jeff Bezos, over the New York Times.
This year our views have been divvied up into six sections: people and power, money and markets, buys and sells, fees and fortunes, mergers and manias, and odds and ends. In the first category, look for India’s next prime minister to channel Japanese leader Shinzo Abe in reviving his economy. For Latin America, commodity price deflation will make governance matter for a change, giving Mexico a chance to shine.
The highly anticipated tapering of bond buying by the Federal Reserve will be the obvious story of the financial markets. Optimists say it’s all priced in, but they may not be prepared for 10-year Treasury bond yields of 4 percent. Ditto the great American oil boom: abundant supply should keep energy inflation at bay for another year.
In the corporate world, activism will keep more companies on their toes, including General Electric, which has thus far managed to keep uppity investors calm. Among other predictions: America’s gun bubble is poised to burst, the booming solar business will hit electric utilities, Siemens’ new chief faces rising pressure for a turnaround, and some Chinese corporations will warrant newfound attention from investors.
On Wall Street, look for Wells Fargo to snatch more market share from established titans, while prosecutors scramble for new targets after shaking down JPMorgan and hedge-fund manager Steve Cohen. Mergers and acquisitions activity will continue, but not meet the ardent expectations of its Hermès-tied practitioners. And don’t be surprised if Chinese antitrust watchdogs flex their muscles.
There are other odds and ends to consider in the coming year, such as which buzzwords will proliferate following a 2013 rich in “visionary” and “disruptive” behavior. And investors may get glimpses of hot new firms like Square, Pinterest and the “shared economy” favorite Airbnb. There will be sport, as the World Cup puts the spotlight on Brazil. And in case you’re wondering, Germany will walk away with the trophy.
Read Predictions 2014 in the spirit in which it has been written. And whether we are spot-on or just half-right, know that Breakingviews will work tirelessly to explore the coming year with the insight, analysis, speed and common sense you have come to expect.