Comment: The year ahead – an early prediction of 2015

I’ll vary the pitch this year by giving you a mix of potential good and bad. I make the usual caveat of all soothsayers: predicting doom frequently results in people taking remedial action, thereby making the would-be prophet look inadequate. But at least we all survive another year.

PREDICTION: 2015, the Year of the Sheep, will see an outbreak of currency wars. China will devalue the yuan to boost exports and fend off deflation. What everyone seems to have missed this year is that China’s real exchange rate has been dragged up because the yuan is still loosely pegged to the almighty dollar. Meanwhile, the neighbouring Japanese yen has plunged a whopping 40 per cent since prime minister Abe started printing money like confetti.

PREDICTION: The economies of America and Britain will show decent growth in 2015, which can’t be said for the rest of the world. The US should clock 2.8 per cent, up from 2.3 this year. The UK should probably hit 2.4 per cent – a decent historical average though down on 2014. But I remain sceptical that we are genuinely any richer. The UK only surpassed France as the world’s fifth largest economy on a technicality. We have changed the way GDP is calculated to include £5.7 billion spent on prostitution and £6.62bn on illegal drugs. Expect consumers to rein back by year end, as deflation raises real debt levels.

PREDICTION: In the corporate world, there will be a big stooshie over BT’s bid for the mobile phone operator EE – a move that could reshape at least four markets in the UK. A debt-ridden BT exited the mobile market over a decade ago. Now as technologies and platforms converge, it is desperate to buy its way back in. This would allow the company to bundle together broadband, pay TV, telephone and mobile products as a single package. But will Sharon White, new boss of Ofcom, the industry regulator, countenance such a potential monopoly? And if she does, how will a threatened BskyB and Virgin Media retaliate? By linking with a mobile operator? Calling Vodafone.

PREDICTION: the FTSE 100 should break the 7,000 mark, if only because the market is still living in a fool’s paradise of cheap money. Besides, investors have nowhere else to go as capital continues to flee troubled developing economies. That said, the problematic outcome of the UK general election in May could give the City a serious case of the jitters. Alex Salmond supporting a minority Labour administration in return for Devo Max? Or Nigel Farage getting his EU referendum in return for keeping Dave and George in Downing Street? I’d predict the FTSE down over the year.

PREDICTION: Interest rates won’t go up. With UK price growth at rock bottom, or turning deflationary, the Bank of England won’t dare hike rates until at least 2016. Only caveat is if the US Fed ups rates to cool the economy. Even then, any rise by the Bank of England will be in the form of a gesture.

PREDICTION: There will be several more bank scandals in the City, resulting in more mega-billion fines. No one will go to jail.

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