The Balanced Optimist’s Guide to 2017

What exactly is a balanced optimist? It’s someone who tends to be optimistic, but knows that bad things can happen and prepares for it. This is me, and this is my balanced optimists guide to 2017 and onwards.

Every year, Bloomberg publishes a Pessimist’s Guide to the coming year. When you look at it in retrospect (2015 here and 2016 here), you see that a few of the pessimist predictions came true. For example, Britain leaving the EU. But most of the pessimistic predictions didn’t come through. It’s the same every year. Things are never as bad as expected. The end of the world never comes.

Here are some examples of long-term trends in the world:

This is what we can expect to continue into the future. There’s a lot to be optimistic about. But let’s be balanced and realistic too. 2017 and onwards won’t be all good. Taking the Pessimist’s 2017 View into consideration, at least a couple of these things will probably happen, or some variation of them:

  • Russia will try to continue, and extend, it’s strategy of having frozen conflicts on Russian borders, as a way of controlling those borders.
  • The Brexit process will go badly, and the UK economy as a whole will suffer.
  • North Korea will have more military tests. Trump will need China’s help with North Korea, and his anti-China stance will be reversed.

As investors, this most likely means the following:

  • Russia is still a highly risky place to invest in, and probably will remain so for some time.
  • The UK as a whole is not as attractive as it used to be. But some individual companies can still do ok.
  • China is still important and will continue to be important to the world and to global economies. It still has great potential as an investment.

The advancement of human civilization is like a stock chart. There is a long series of ups and downs, but overall more up than down. The S&P Global 1200 index is a good symbol of this. Here is the most recent 5 years:

S&P Global 1200

For the world as a whole, 2016 was a rough year. But the overall trend is up. This is what we can expect over time, no matter what the news says.