Nostradamus may not have predicted 2016 more accurately. Of course, my goal was to predict 2016 economic results in 2015 – not a century in advance. However – I will take credit for some of the accurate forecasts.
- Prediction was → Price of Oil per Barrel ▼12%
In reality as of this date, the actual decline average was +20%. The gas and oil industries were never able to rebound. However, next week, I will be predicting some positive economic indicators for the 2017 gas and oil industry.
- Prediction was → Price of Gold ▼5%
Would you believe the actual decline in the value of gold was 4.8%. The day that precious metal are adversely correlated to the price of gold are gone.
- Brazil will set new economic lows
After spending so much time in this South American country – this prediction was inevitable due to the corruption of their politics, World Cup and hosting the Olympics. Until the unemployment (which is currently over 11 million Brazilians) and the elimination of unparalleled superfluous regulatory agencies are truly addressed – this country will continue to be a “diamond in the rough”.
- US$ in relationship to the CAD – little to no change
The USD compared to the CAD low was 1.253 with a high of 1.458.
- Most Improving Industry – Transportation (except Aerospace) – both due to price of energy and demand.
The reason transportation firms have been able to survive during periods of slow economic growth is their ability to effectively maximize the profit per shipment. This results in a continued growth at 2% to 4% for freight management annually, while firms continue to find innovative ways to improve shipping procedures. According to the U.S. Freight Transportation Forecast complied by the American Trucking Association, intermodal transport is expected to grow at a rate of 6.6% per year until 2016 and then at 5.5% per year until 2022.
- Most Challenging Industries – Healthcare Providers, Gas / Oil and Small / Regional Banking. (Healthcare Providers and Small / Regional Banking due to compliance challenges, lack of economies of scale, size is not a competitive advantage)
Technology has proven to be a huge factor in the issues facing the health care and banking industry. The health care industry lags behind many other industries when it comes to technology because it’s difficult for health professionals to have the analytical and business oriented skills to comprehend data that would improve their efficiency. The lack of information exchange between payers and providers also creates a challenge in providing better service to patients. Technology has also reduced barriers to entry in the banking industry as large upfront investments aren’t needed for new players to enter the market. The behavior of banking consumers is also changing as Millennials are more tech-savvy and transaction-oriented which is increasing the competition in the industry as they are less influenced by traditional brands.
- M&A Continues to be a “Seller’s Market”
Investors’ confidence took a hit in 2016 following the vote for Brexit. In spite of this event, many of the overall M&A opportunities and conditions remain favorable for deals. While larger deals and private equity deals saw a decline prior to the EU referendum, the corporate mid-market deals remained relatively robust. The transaction process slowed following Brexit as deal makers assessed the new environment more cautiously. However cautious, deal makers are still getting deals done and making strategically important acquisitions, demanding premium valuations. Although 2016 has been a time of uncertainty and change for the Private Equity market, several experts have concluded 2016 is still very much a “Seller’s Market”. Below is a look at the number of deals in 2016
- US Manufacturing – Challenges Continue- Bringing it back to US delayed by appreciation in US dollar
According to most economists, the dollar is likely to continue appreciating for two more years at least due to the relatively low-risk U.S. market that appeals to investors. In 2015, the trade gap hit lowered U.S. GDP growth to 2.4% (from a potential 2.8%) and predicts a similar decline of about .4% for 2016 and 2017 as well, according to Bergsten of the Peterson Institute.
- Canadian Manufacturing ▼5% - currency +inefficiencies+ international market challenges
Approximately 70% of total Canadian manufacturing decreased in 2016 with constant dollar sales declining and a decrease in sales of motor vehicles and petroleum and coal products.
- The Canadian housing bubble bursts. The epicenter will be Vancouver and Toronto with national fall out
The Vancouver housing bubble is known as the hottest in Canada experienced signs of trouble in July as overall sales declined by 19% and sales of detached homes declined by 31%.
- Major Technology Winner – Microsoft
Microsoft’s success can be measured by its 20% jump in search revenue and its ability to double the number of Dynamic CRM users. This combined with a 2.7% dividend yield in cloud sales and innovations gives Microsoft an industry lead. Microsoft’s stock price on January 4th, 2016 was $54.8 and today it’s $63.61.
- Major Technology Loser – Oracle
Compared to Microsoft’s success, Oracle cannot measure up. Oracle’s stock price on January 4th, 2016 was $35.75 and today it’s $38.88, further proving the success of Microsoft