We shouldn't be afraid of anything - and here's why
Given how well the Irish economy has turned around in the last two years, it seems a little odd to suggest that we are entering 2016 with quite a lot of uncertainty.
Whenever "uncertainty" is mentioned in relation to business, politics or the economy, it usually means a fear that some enormous calamity is going to befall us. But in this instance, we enter 2016 with some uncertainty but not necessarily any trepidation.
Economic forecasts suggest the economy will continue to grow this year at a pretty fine clip. The stock market has had another solid year at home but it appeared to just mark time in the bigger markets like the US.
The business environment appears to be improving not just for Irish exporters but for smaller companies which are dependent on rising domestic demand.
Key external economic factors which have been so helpful in our recent revival of fortunes, (low interest rates, a cheap euro and cheap oil) all look set to continue for at least another one to two years.
Yet, there are big unknowns out there which could have a negative impact on us all, but only if they really go the wrong way. Here are a few.
The ISEQ Overall index of Irish shares is finishing out the year up around 31pc. This marks another very strong return and the index is up around 129pc since the last general election in the spring of 2011.
To a certain extent Irish share prices have mirrored the extraordinary bull run that has taken place, particularly in the US since the financial crisis of 2008. Yet the dynamics on Wall Street are changing. The S&P 500 index of larger companies gained just 1.3pc in 2015. Goldman Sachs is predicting a similar modest gain for 2016 of around 1pc.
The Dublin market has benefited from the overall Irish recovery story and amazing returns from individual companies on the exchange like Ryanair. Plus we haven't been dragged down so much by the collapse in oil and commodities stocks.
The question is will the S&P mark time for another year. When Goldman Sachs predicts a second year of gains in the 1pc region, one has to think the outcome might well be a lot worse. After huge artificial boosts from quantitative easing US markets appear to be on track for the proverbial soft landing - always something to be cautious about believing.
Warren Buffett's Berkshire Hathaway is having its worst share price performance since 2009 despite net earnings up 18pc and a book value gain of 3.3pc. Yet the stock is down around 11pc on the year.
This suggests an inordinate market love affair with racier tech stocks such as the so-called Fangs (Facebook, Amazon, Netflix and Google), to the detriment of very solid traditional businesses. Amazon shares, for example, gained around 125pc in 2015.
The share price of many better Irish stocks already includes their "recovery play bonus", so a harsher market correction on Wall Street could be felt here.
Big stock market news to watch out for this year will be the new AIB IPO. Will it go ahead in 2016? If everything holds steady in the US it probably will. If not, the new government could be forced with the decision of settling for a lower valuation or hanging on longer.
Elsewhere, will Ardagh get a long awaited IPO metals division away this year? Given the changing market sentiment in the US towards the higher yielding corporate bonds of heavily borrowed businesses, it just might have to sit it out for longer.
There are lots of positives out there on the economic front as we head into 2016. Solid job creation, a strong flow of inward investment, record tourism numbers and growing domestic confidence should all continue in our favour.
The Taoiseach's decision to change his mind about when full employment could be achieved (in 2020 instead of 2018) was simply acknowledging reality rather than reflecting a pending economic cataclysm.
Much of our good economic fortune has been generated by favourable external factors which should continue. The collapse of the euro - a possibility which exercised us all so much just a few years ago - has gone off the agenda, but it doesn't mean underlying problems are all fixed.
The Financial Times's economics correspondent Stephanie Flanders wrote last week about Europe, saying: "There is no pressing economic crisis confronting the continent in 2016, thank goodness."
Uncertainties for us come from the Brexit referendum likely to happen later this year. It is far from certain what way that will go and opinion polls suggest it will be close, with the exit side gaining a little momentum in recent months.
If the UK votes to leave, it doesn't mean we will bear the negative economic consequences immediately. It would be a negotiated exit from the EU which could take time and involve several years of trade discussions between the UK and dozens of other countries.
The ramifications of a British exit, if it were to happen, won't kick in this year.
One of our biggest economic threats in 2016 could be a reduction in competitiveness. Dublin is becoming a more expensive place to live particularly when it comes to finding a place to live. The total mess that has been made of the housing market will have direct economic consequences, as well as obvious social ones.
Higher rents help to fuel higher wage demands and pressure for further tax cuts.
I am sure that already foreign multi-nationals hiring skilled workers for jobs in Dublin are finding that many of them are put off by rising rents.
This coming year will be one of two parts - not two halves - in the political realm.
Part one will be a deluge of unrealistic and undeliverable pre-election promises based on the fantasy exchequer finances of an economic utopia.
The second part, once a new government is formed, will be about reacquainting us with reality by slowly undermining those fantasy expectations.
A return of a Fine Gael/Labour government, possibly with a handful of independents is a distinct possibility but it is very hard to call. A return of the same government would be bad for Sinn Fein, because it would deprive the party of a five-year run as lead opposition party. It will end up slugging it out with Fianna Fail for that mantle in the years ahead.
A Fine Gael/Fianna Fail government would finally divide the economic landscape in a more defined left/right way by giving Sinn Fein its uncontested lead opposition party status.
A hodge-podge government made up of too many groups and independents will be bad for the economy. If it collapses early, there will have been political stagnation. If it trundles on, the uncertainty won't be good for business and the economy.
The biggest challenge for the next government will be managing expectations. Can a government convince its voters of the merits of holding back the purse strings for benefit in the long term when the money to do certain things might be sitting in the bank account in the short-term?
Unfortunately, I doubt it.
Sunday Indo Business