Predictions are tough to make. They are especially difficult with central banks manipulating asset prices. Excess liquidity does wonders to stocks no matter what the individual company’s fundamentals looks like. That being said, I still want to make some predictions in this article for 2017. They may not be more accurate than the typical punditry, but they will be variant. When you have independent thoughts and don’t succumb to herd mentality, it’s not tough to think differently.

My first prediction is about the 10-year bond. My expectation is for Trump’s plans to underperform growth and inflation expectations. It’s not an outlandish concept for the 10-year bond yield to end its rally after Trump is inaugurated and the pedal doesn’t meet the road immediately. I can see it reversing course and ending the year below 2%. When the system unwinds because investors lose faith in the dollar, interest rates will rise, but we’re not there yet.

I’ve said this before, but I expect the Fed’s guidance for 3 rate hikes won’t be met. This goes in tune with my prediction for the 10-year bond yield. Last year I predicted one rate cut. That was because I expected a recession coming. The global central bank coordinated actions saved the economy from crashing in February. While Trump’s policies will disappoint, I think optimism will keep the economy growing in the first half of the year. If the economy slows in the second half, I don’t expect the Fed to get out in front of the slowdown by cutting rates. They will cut rates after a recession starts. Maybe I’m snake-bitten from last year, but I’ll go closer to consensus and say there will be no rate hikes or cuts.

The next prediction is on Trump’s presidency. The economy will not respond as Trump hopes, mostly because there won’t be much that gets done. Trump has never negotiated with Congress in this type of situation, so it won’t be as easy to get things done as he expects. However, since the presidency is the executive branch, Trump will be able to get his desired regulatory cuts. I will give him an A minus for his picks for his cabinet. The minus is for not picking John Allison as Treasury Secretary. The chart below shows how Trump’s cabinet is very heavily represented by members who have C-Suite executive level business experience. Trump is a great delegator. Finally, there will not be a trade war with China because it would ruin both economies.

We’ve seen political risk play out in Italy and the U.K., but 2017 will see it come to Germany. Just because the German economy is being rewarded by being in the EU doesn’t mean there can’t be unrest. The two issues Germans have are Mario Draghi’s QE program and Angela Merkel’s acceptance of refugees. Italy’s banking system will get worse, which will spark the Germans’ disgust with the disorganization of the country. Any inflation increase will be blamed on Italy. The recent terrorist attack in Germany at the Christmas market is increasing anti-immigrant sentiment. When the political winds cause the refugee program to halt, the citizens will not be satisfied. Merkel will lose the next election.

Gold will have a good year when investors realize the Fed will not raise rates. Any gains could be limited at first because of inflation being muted. Towards the end of the year, if the economy starts to hit a soft patch, it could rally. Gold rallied at first in the last cycle before crashing with the market. If the next recession is the one where the dollar crashes, gold will obviously rally. Gold will end the year at $1,300 an ounce.

Bitcoin is tough to predict because it is so volatile. Any issues in the Chinese economy, could spark buying from the Chinese people. Bitcoin is on such a tear, it could make new all-time highs in January. Anytime an asset skyrockets, I get nervous, so another crash could come after it makes new highs. It will end the year at $700. Speaking of China, I expect more slowing. It’s easy to predict GDP growth because the government manipulates the data. I’ll guess GDP growth will be 6.4% for the year.

As far as American GDP growth, I expect 2017 to see GDP growth at about 1.5%. The first quarter could be above 2% because of optimism surrounding the Trump administration. Q3 will have a tough comparison because the 3.2% growth in Q3 2016 was driven by soybean exports. Since that growth won’t come twice, there could be sub 1% growth that quarter. I expect the dollar rally to end when the market realizes the Fed won’t raise rates and the economy won’t be as strong as economists expect. The dollar is in a bubble which will be pinched at some point in the year.

The U.S. stock market is overvalued. The key to making money on the short side will be identifying a catalyst that will show Trump won’t bring an accelerated nominal GDP growth rate. I’ve felt the GOP Congress will give in to Trump’s demands. Will they abandon their principles for political expediency? Yes, they will, but it won’t be a smooth transaction. I expect the market to have a down year, with my price target for the S&P 500 being 2,100.

The worst sectors will be industrials and energy. The uptick in energy stocks has already priced in the earnings growth which will occur in 2017. The wild card is what happens if/when Trump rips up the Iran agreement. This could cause a geopolitical risk premium to be added to the price of oil. Industrials need Trump to follow through with a trillion-dollar infrastructure plan. I think it will disappoint just like the Obama stimulus did.  If interest rates come down, the dividend stocks which are utilities and consumer staples will have a good year.

Conclusion

I’m a bear heading into 2017, just like 2016. I was wrong last year, but I have to stick to my guns given the optimism and expensive valuations in the market. 2017 should be the most interesting year in decades because of the political uncertainty in America and Europe. As always, staying nimble with your trading portfolio makes sense.