Capitol Notes — Ten Fearless Forecasts For 2016

Navigating The Road Ahead: 6 Investment Themes For 2016

Happy New Year, everyone, we’re back for what should be a memorable 12 months in Washington. We can’t ever remember a more difficult year to forecast — but no guts, no glory…

One: The Republicans head to Cleveland in late July without a clear nominee. Donald Trump loses Iowa to Ted Cruz on Feb. 1, narrowly wins New Hampshire on Feb. 9 and fights Cruz to a draw in the March 1 “SEC primaries.” Both candidates slug it out thru the spring, while one establishment candidate emerges — probably Marco Rubio but possibly Chris Christie or Jeb Bush.

Two: Trump methodically amasses a plurality of delegates and then aligns with Cruz at the convention, and wins the nomination with just barely enough delegates. Trump overcomes a ferocious push-back from the establishment, which settles on Paul Ryan — too late.

Three: Republicans will fear a fall bloodbath in Congressional elections, so the establishment icons — led by the Bush family, Mitt Romney and John McCain — will consider forming a third party, but that will fizzle.

Four: Hillary Clinton faces an early 2016 crisis as Bernie Sanders beats her in New Hampshire and emerges as a serious threat. But Clinton’s money and organization will prevail, and despite more email scandals and revelations about the Clinton Foundation, she will enter the general election as the favorite against a bitterly divided GOP.

Five: The U.S. economy grows modestly, with very little inflation, but global growth continues to languish — spooking the Fed into keeping the funds rate below 1 percent for the entire year. The Treasury 10-year bond yield fails to climb much past 2.5%.

Six: New House Speaker Paul Ryan shakes things up, moving on criminal justice overhaul, international tax reform and a budget bill — but his ambitious agenda will bog down in the Senate. As for spending curbs, they’re out of fashion — higher outlays for the Pentagon are certain, and the deficit will stop declining.

Seven: Determined to avoid lame duck status, Barack Obama governs by regulations — gun control, clean air regs, tough new financial adviser rules, etc. Ryan and the GOP Congress will seek to block many of these regs by cutting off funding.

Eight: Despite an occasional high-profile attack, ISIS will show signs of peaking, as coalition forces — led by Russia — recapture territory in Syria and Iraq. The big Mideast story will be a Shiite-Sunni civil war.

Nine: With economic growth stagnant in Western Europe, even modest Fed tightening will drive the dollar higher. Dollar-euro parity will be the big global economic story of the year.

Ten: A year from now, after the nastiest election in recent U.S. history, the economy will begin to sour amid gloomy consumer confidence — and Janet Yellen will be forced to open up the spigots as 2017 begins.

Too gloomy? Perhaps. But we think the upcoming election will be deeply disillusioning, with the public disliking all of the major candidates. It’s a deeply flawed group, isn’t it? Optimism usually rises after an election — but an increasingly tiny minority will determine the next president — and the majority will see even fewer reasons for optimism following this appalling election.

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