More Predictions | Politics | Economics

Where’s Tom Cruise when you need him? Drafting The Weekly this week, which details our predictions for the UK economy and politics for 2019, felt very much like Mission Impossible. In previous annual prediction publications, Bull and Bear have focused on a few, yet important political and economic issues. This year they’ve decided to up their game (or increase their chances of actually getting some right!) by making ten predictions (like their ten sporting predictions last week). Here goes...
1. Brexit. Deal? No deal? Hard Irish border? Customs Union? WTO? More like WTAF! We, like the rest of the world, have absolutely no idea what is going to happen. However, despite the complete apparent apathy towards the B-word, Bull and Bear predict that a last-minute deal with Europe will be agreed ahead of 29 March. It’s definite squeaky bum time though. However, there appears too much to lose by not agreeing a deal and for that reason alone Bull and Bear can see something finally being agreed.
2. Theresa May will not be Prime Minister on 31 December 2019. According to Paddy Power, the latest odds are 4/7 that Mrs May will be replaced this year. Her stoicism over the last few years should be applauded, but whether she jumps or is finally pushed, according to Bull and Bear she’ll be available for bookings on the public speaking circuit by the beginning of 2020.
3. General Election. There won’t be one in 2019. Even after Theresa May leaves, the Conservative Party won’t want to put their ‘parliamentary control’ at risk. The odds of a General Election this year are 6/4. Bull and Bear are both more comfortable predicting that the next General Election will be in 2022.
4. Next Prime Minister. It won’t be Boris (although Bull is a big fan). Definitely not Jacob Rees-Mogg. Bull and Bear finally concluded that it will be a two-way battle between Sajid Javed and Michael Gove, who will make a late charge for the finish line. Michael Gove will then win it by a furlong. The odds of this happening are 9/ case you are tempted! 
5. European Elections. Fast approaching in late May, there has never been so much interest in elections at the European Parliament. For the first time in forty years, anti-establishment parties are expected to end the dominance of mainstream politics at the European Union. They are, currently, reportedly on course to win a third of the seats. An expanded populist representation will make building legislative alliances more difficult and would promise a turbulent term. Bull and Bear’s prediction? The biggest European parties will lose a significant percentage of MEPs, but not ultimately enough to change the status-quo. 
6. GDP. This week it was announced that in 2018 the UK recorded its lowest growth since 2012 at 1.40%, and the indications are that 2019 isn’t going to be any better. Investment projects will continue to be mothballed in the short-term, although activity is expected to pick up in the second half of the year. Of course, this all assumes a fairly smooth departure from the EU. And, as for Bull and Bear’s prediction? Economic forecasts are known to be unreliable, but they both feel that UK GDP growth in excess of the Bank of England's 1.20% forecast will be achieved in 2019.
7. Interest Rates. On the up? They must be in the long-term, although the chances of them escalating quickly appear slim. The Bank of England unanimously voted to keep them at 0.75% at its February meeting and scaled back the number of increases in borrowing costs needed to meet the Government’s 2% inflation target to one 0.25 percentage-point rise in the next two years. So, bearing that in mind, it seemed inappropriate for Bull and Bear to predict anything other than there being no interest rate change over the course of 2019. 
8. Bond yields. Waning expectations of future rises in interest rates have given a lift to the UK government bond market. Gilt yields have dipped of late, meaning prices rose after the Bank of England pulled back on its rate-rise plans. Currently hovering around the 1.20% mark, ten year gilts offer a 1.06% point yield premium to the equivalent German Bund, and a 1.24% point premium to Japanese government bonds. Bull and Bear do not expect too much volatility over the course of 2019, predicting 10-year government bonds to remain below 1.30% at the end of the year.
9. The FTSE 100 index closed this week at 7,236, representing a four-month high. Bull and Bear couldn’t be further apart about how the FTSE will perform this year. Bull believes the FTSE 100 will be the best performing global stock index in 2019, offering attractive relative value. Clarity on Brexit and modest domestic growth will provide the catalyst for the UK market to close the valuation gap with the other stock markets. Bear, on the other hand, is far less persuaded. The stock market has a lot stacked against it given the prevailing uncertainty over Brexit, a sluggish economy and the possibility of further political disruption in Westminster. Their consensus prediction? The FTSE rising to 7,500 by the end of 2019.
10. Currency. Although the pound is currently weak, the more clarity there is over Brexit, the more likely it is that the pound will rise. Depending on how the UK politicians manage the divorce process from here, sterling could soar to $1.60 or plunge to $1.00. Bull and Bear eventually agreed that sterling will appreciate 5% against both the Euro and the Dollar, taking the year-end figures to €1.20 and $1.35 respectively.
If Bull and Bear get all ten of their economic and political predictions correct, they have announced that they will retire for good. The Weekly readers can therefore be pretty sure that they will be back in early 2020 to assess how they fared!