What a year 2016 has been. I can’t think of any other series of events since the global financial crisis that has dealt a huge blow to conventional wisdom and the credibility of financial and political analysts. The year has not yet ended but I feel that before people can rewrite history and say they predicted the unpredicted, I should record some of the significant events that made many experts look bad.
The UK voted to leave the European Union
Although now people say that the polls showed that Leave was going to win, the general opinion among experts was that Remain would win. You could see this for example in the betting markets or the model developed by Bloomberg which gave Leave only a 30% probability. The sharp drop in the pound after the vote is an indication that most traders were also betting on Remain.
Bernie Sanders was no pushover
Without Joe Biden or Elizabeth Warren, the 2016 Democratic Presidential Primaries were expected to be a coronation for Hillary Clinton. Few had thought that a 74 year old Independent Senator from Vermont who called himself a Democratic Socialist could be much of a challenge. However, Bernie Sanders surprised most people by making the primaries very competitive and going ahead to win 43% of the delegates even as leading members of the DNC were against him. Although he did not win, the Democrats and Hillary had to absorb a lot of his platform, including opposition to the TPP trade agreement, in order to make peace with his supporters.
Trump won the Republican Nomination
It is funny now reading how experts gave Donald Trump no chance of winning the Republican Primaries. Jeb Bush was to be the anointed one, then Marco Rubio, then the unlikely Ted Cruz and then Kasich was to make a final attempt to stop Trump at the Republican Convention. But Donald shocked everyone by beating all these experienced, well-financed candidates to become the Republican nominee for president.
Three Quarters with no rate hike by the Federal Reserve
The Federal Reserve is now largely expected to raise interest rates by 25 basis points in their next meeting in December. If that happens it would be their first rate hike since December of last year. Their largely expected one hike per quarter did not materialize, much to the relief of the stock market and emerging economies.
Trump is President-Elect of the USA
Just look at the picture above. That is how sure the analysts were that Hillary Clinton was going to be elected President of the United States. Well, Trump lived up to his self-given nickname of Mr Brexit and pulled off one of the largest political upsets in the history of the USA.
And as I said at the start of this post, the year is not yet over. What will happen next? What will happen in 2017? How sure of yourself are you feeling?