Reflections on 2018 and What Lies Ahead – Introduction
2019 was a relatively bad year for many investors. It was a great one for day traders who focused on making money as volatilityaa increased. This article will look at some of my reflections during the year.
First, cryptocurrencies were the worst-performing asset classes in the year. Looking back, there are many reasons why the currencies failed. First, the industry was a bubble all along. As the price of Bitcoin and its peers increased, more people entered into the business. They did this without a good understanding of what the currencies they were buying were for. All they wanted was to do was ride the upward momentum. As a result, they continued to buy even the worthless of the cryptocurrencies on hopes that they too would become the next bitcoin. Historically, when such a thing has happened, the result is that the bubble tends to pop. As the price declined, the same investors rushed for the exit. This will probably be the year that cryptocurrencies complete the meltdown. It will also be the year that relatively stable currencies will be created.
Second, the Federal Reserve demonstrated the ineffectiveness of forward guidance. The Fed started the year being hawkish about the economy. This happened even after the new Fed chair came in. Their hawkishness was reflected in the statements and forward guidance that they offered. This forward guidance pointed to four hikes for the year. While these guidance help prevent the market volatility as the Fed meets, they put the Fed in a corner in the final meeting. This is because the fundamentals had changed greatly but the Fed had to follow up with the guidance. At the same time, the Fed seemed unaware of the ideal interest rates.
Third, China continued its foreign influence, which is changing how the world operates. If you have followed the Chinese closely, you probably know about their ambition to dominate the world. The country is doing this through the One Belt initiative. Through this, China is rapidly lending money to countries with the goal of acquiring key strategic assets. Recently, it was announced that the country was set to take over a key port in Kenya. This came after the country took over another one in Sri Lanka. Therefore, in the new year, the country will continue flexing its muscle as the trade conflict intensifies.
Fourth, the year showed the challenge OPEC will always focus on. This is after the United States became self-sufficient, partly because of the miscalculations of OPEC. A recent report by the EIA showed that the United States had become a net oil importer. The country achieved its goal of becoming energy efficient. As a result, OPEC must now contend with the fact that the US will continue having a better say in the world oil markets.
Fifth, the challenge of the euro came to the limelight during the year. As you know, the euro was created to help Europe have a better voice in global issues. To a large extent, the euro has been a success because many small countries like Greece are represented when major decisions are made. However, there is also a sense that the euro has been a failed project. As populism continues in Europe, we will continue to pay close attention to the happenings there.