Tuesday 19 September 2017

Davy's 'outliers' for this year include China-US trade war

Trump has advocated protectionist trade policies. Photo: AFP/Getty
Trump has advocated protectionist trade policies. Photo: AFP/Getty

Gavin McLoughlin and Samantha McCaughren

A trade war between the US and China and the return of the Cold War are among Davy Asset Management's outside bets for 2017.

In its list of 'outliers' for the coming year, the firm also speculates that Amazon could buy Twitter and that US interest rates could be hiked on four occasions.

Last year outliers from Davy included Donald Trump's election and the Brexit vote. It was around 70pc accurate on its political outliers, and 40pc accurate on its outliers for the markets.

Davy's Chantal Brennan and Jeremy Humphries speculate that there could be some major mergers and acquisitions activity this year.

"Amazon buys Twitter and decides to pick-up where Google left off with a new take on augmented reality glasses building on the success of Amazon Prime, Kindle Fire, Echo, etc," Brennan and Humphries write.

"Apple acquires Tesla, Tim Cook retires and Elon Musk becomes CEO. Microsoft acquires Salesforce and Marc Benioff leaves," the authors add.

They write that the Cold War could be restarted if Wikileaks or another agency release details about Russian involvement in rigging the US presidential election.

They expect that the strength of China's yuan against the US dollar will be one of the year's probable "hot potatoes".

"Stronger US growth and in turn a stronger US dollar may result in Trump imposing tariffs to prevent cheaper imported goods undercutting domestically produced ones..."

They write that President Donald Trump could impose "massive trade barriers with China sparking a trade war which damages both countries' economies".

The US appears headed for a trade war with another country, Mexico, amid chaos surrounding relations between the two nations.

Trump said in a Twitter post on Friday that Mexico "has taken advantage of the US for long enough" by not addressing trade deficits and security along the "very weak border".

He said he'd follow through on campaign pledges to charge Mexico to build a border wall.

The election of Marine Le Pen as French president, a fourth term in office for German chancellor Angela Merkel, and a "blow out" in the bond market sparked by interest rates rising faster than expected are also among Davy's outside bets for the year.

Sunday Indo Business

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