5 Market Forecasts For 2017

By Taki Tsaklanos
7 years Ago

UPDATE (11 December 2016): We updated this article to reflect our latest 2017 forecasts.

What will markets do next year? That is the trillion dollar question top of mind of every investor.

As the last quarter of 2016 has started, new trends are unfolding, so it is about time to look into the market trends for 2017. Although we do not engage in price predictions, our methodology allows to forecast trends.

We have written many market forecasts for 2017. In this article, we selected 5 market forecasts which we believe could benefit every investor.

Market Outlook 2017 According To Our Proprietary Indicators

Our proprietary market barometer looks at all leading markets, and gives a sense of intermarket dynamics. The point in this is that markets do not move in a vacuum, they move in relation to each other.

Right now, risk assets are in a bullish mode: stocks, yields, copper and crude are all in a long term uptrend. On the other hand, gold and the Japanese Yen, both fear assets, are in a long term downtrend.

The market barometer reflects the state of markets at a given point in time. To get a sense of what the future will bring, we look at our leading indicator: 20 year treasury yields. Below chart makes the point that 20 year yields introduce a new phase in markets (risk on vs risk off) exactly at times when extreme high or low fear levels coincide with peaks and bottoms on its long term chart (see red and green circles on the chart).

Right after the Brexit vote, 20 year yields bottomed, at a time of maximum fear. That was a turning point for risk, and, since then, risk assets started outperforming fear assets. Stock markets broke to all-time highs, copper and crude rallied, while gold sold off.

With our leading indicator suggesting risk is on, we expect this trend to continue into the first part of 2017. As of the summer, our expectation is that stock markets will start correcting, potentially very sharply. Bonds will become attractive at that point, in line with our former bond market outlook, while commodities will certainly not be attractive.

Bond Market Outlook For 2017

As 20 Year Treasuries have peaked in July of this year, it is obvious it will be followed by a retracement. Now here it becomes a bit more tricky. We see two potential scenarios playing out in terms of retracement:

Scenario 1: A retracement in bonds will come with significant risk taking, which will push bonds to their lower support at around 105. In that case, rates will rise significantly, and, in doing so, stocks will go much higher as gold would feel a lot of pressure.
Scenario 2: Bonds will retrace mildly, rates will rise moderately, stocks will do well as the sentiment will still be “risk on” but only moderately. In that case, 20 Year bonds will retrace until the 120 area.

Stock Market Outlook For 2017

First and foremost, in order to determine the answer to this question, we remain focused on key price levels on the chart(s), combined with sentiment, both fundamental components of our thesis. As outlined in a recent piece, we do not expect a stock market crash in 2017. On the contrary. But we should always be on the outlook for changes in trends; a bearish scenario would kick in if the S&P 500 would breach the 2000 level and, ultimately, the 1850 level

A Gold Price Forecast For 2017

We see gold moving towards the lower area of its bearish trend channel. Right now, support comes in around 990 USD. By the second half of 2017, that will be around 890 USD, which is exactly the peak of 1980. In other words, we do not exclude the scenario in which the gold price will hit 890 USD in 2017 after which it will turn around and evolve into a new and strong bull market.

Will The Stock Market Crash In 2017?

When examining ongoing price action in the stock market chart, we see many things, but certainly NOT a stock market collapse in 2017. If anything, the retracement in September tested the 2016 breakout level, which we consider an incredibly bullish sign. In other words, the stock market collapse story could work well as a “story” to sell page views, but it is not a serious thesis when looking at a chart.

Additional market forecasts for 2017

The Best 5 Stock Market Sectors As 2017 Kicks Off

The ongoing market sector rotation favors value stocks over growth stocks. Uncoincidentally, all all attractive sectors we identified are part of the segment ‘value stocks’. This article highlights 5 specific sectors which are very bullish going into 2017.

Exceptional Chart: China Stock Market Will Go Much Higher In 2017

The chart of the Shanghai Exchange makes our point. The chart setup is truly exceptional, we have not seen such a pattern in a long time. Two trendlines are colliding right at the 3000 level. This is huge, as a big move is coming very soon. As support lines have held consistently over the last two years, the odds favor a bullish breakout, leading to a very bullish stock market in China in 2017.

Will Emerging Markets Become The Investment Of 2016 And 2017?

By far the most interesting emerging market on our rader is India. It is our favorite market for 2016 and beyond.