Predicting a Trump win, higher oil prices and higher interest rates globally among other things was relatively straightforward in 2015. We were bang on there for our predictions. However, we got Bitcoin wrong and the direction of the stock market, although if you checked our Twitter we still fared decently trading those to the short side. We even began to predict Brexit would happen later in the year and this was communicated to our clients.

For 2017, we are taking a more cautious approach as we adopt a wait-and-see approach for the year especially in relation to US assets. This isn’t due to a lack of opinions for the year, but due to the lack of clarity we expect from policymakers, especially the incoming Donald Trump Administration and growing unease in Europe. This year will be kinder to those who take the “if -then approach” (If this happens I expect that to happen), rather than those making grand predictions.

1) United States Dollar (USD) — The USD should continue to broadly increase in strength due to increasing interest rates and an improving US economy. However, the antidote for this is Trump, who has categorically stated he wishes a weaker USD for export reasons. It isn’t yet clear how Trump plans to achieve this or if he will even attempt to. Naturally, this is at odds with his promises of increasing fiscal stimulus and increasing “artificially low interest rates”, but speaking paradoxically is not unusual for the Donald. We’ve previously warned about the impact of a strengthening USD and continue to do so.

2) Oil — Last year we did predict oil would rebound, but we didn’t see an Organization of the Petroleum Exporting Countries (OPEC) agreement in the works, as happened. However, we are sceptical of the OPEC deal lasting throughout the year. Also, increases in supply from the US should also blunt the impact of the OPEC deal on the supply and demand dynamics of oil prices. We expect to see oil range between US$45 and US$75 per barrel.

3) The rise of the democratic dictator. History repeats itself constantly and without prejudice. People historically turn to a “strong man”or “strong woman” when they see systems failing them. I suspect more countries will turn to this mould of character as the reality of demographics set in the West. This prediction isn’t bound only by this year, but by many years to come. The possibility of this feeds into my USD rally view in this year. For example, if Marion Anne Perrine Le Pen rises to power and the European Union’s second-largest economy decides to exit the single currency, it would represent a significant political headwind for the Euro and associated assets.

It should also be noted that a Euro-sceptic leader in France could influence the Brexit negotiation dynamics. Such a leader would be concerned with permitting the path of least harm to the United Kingdom, in order to set a precedent for their own referendum propaganda campaign. Thus, this could strengthen the United Kingdom’s bargaining position and the British pound as a result.

At a time where the US is seen as an economy of relative safety and the sheer liquidity of the EURUSD currency pair, one would expect the anxiety of investors to exacerbate the strength of the USD. Other “safety haven currencies”, such as the Japanese Yen (JPY), should also strengthen at this time.

However, at this time, I can’t definitively predict a Le Pen win.

4) European volatility: It follows from the above point that European financial assets will be volatile this year, especially around election time. None of this article represents investment advice; that bears repeating, especially for volatility related financial instruments/derivatives.

5) Currency wars: It is with some irony that more than a few currencies have depreciated due to Trump’s election and subsequent pronouncements/tweets. Trump has threatened to label some countries as currency manipulators, singling out China and citing a few other countries as well. The assumption here is that being labelled a currency manipulator will actually carry some level of punitive response. The irony, though, doesn’t end there. The fact is, Trump’s comments have actually induced an accelerated depreciation of the same currencies, in particular the Mexican peso. This depreciation increases the attractiveness of establishing businesses in those jurisdictions, which is the very consequence that the Donald is attempting to antagonise. The beauty of unintended consequences.

This depreciation has also come despite many of these countries actively trying to support the value of their currency by various central bank interventions. The Mexican central bank, Banco de Mexico, intervened twice in the first week of 2017 to slow down the decline of the Mexican peso and China has been similarly intervening for many months to keep the value of the yuan from declining too rapidly. One should bear all of this in mind when hearing various nations being labelled as currency manipulators.

The prediction is for many of these countries to stop trying to slow the depreciation of their currencies until Trump realises that his actions are counterproductive.

To recap our outlook for 2017:

• We expect a continued strengthening of the USD.

• We are sceptical of the OPEC agreement lasting throughout the year and foresee a mitigation of its effects due to US supply. Oil prices will range between US$45-US$75 per barrel.

• The rise of “democratic dictators” due, in part, to demographic concerns in the West will cause investor anxiety and contribute to the strengthening of “safe haven currencies” such as the USD and possibly JPY (our longer-term view is the depreciation of JPY).

• European markets will be volatile due to political uncertainty.

• Trump’s comments have elicited some acceleration in the depreciation of certain currencies, which may produce some unintended consequences and benefits.

Craig Harewood and Pierre Forde are the investment director and investment analyst, respectively, at Ourinterest Inc, an investment management firm licensed and regulated in Barbados. Nothing in the above article should be taken as investment advice.