His key predictions:
1. US economy will grow close to 4%.
The reasoning being that the US budget battles is over and the central bank has virtually guaranteed to keep rates at zero.
The knock-on effect of this will be higher global inflation expectations.
2. Stock market rally likely to continue.
His reasoning: equity valuations at or just above long-term averages, companies are awash with cash leaving scope for further gains. Although a repeat of stellar gains of 2013 is unlikely.
3. European crisis will morph into political crisis.
He believes victories for fringe nationalist parties will panic Germany into allowing a more expansionary monetary and fiscal stance. The result: a weaker euro and recovery in the southern European economies in the second half of this year.
4. Japanese growth will disappoint.
The trigger: increase in consumption tax in April will produce a fiscal tightening of 2% of economic output. A further caveat is that when they first introduced the 5% sales tax in 1997, it tipped the economy into deflation.
Deflation (declining prices) is bad because it increases the real burden of debts. Debtors will then cut spending to meet the increased debt burden. And expectations of lower prices decreases willingness to borrow and spend. The resulting depressed demand increases unemployment exerting a downward pressure on wages.
The end result: Japanese economy will likely fall back into recession in the second quarter and the stock market will tumble. The authorities will try to offset this by ramping up monetary policy stimulus with the side effect of a weakening yen.
5. Emerging markets might mark a comeback.
These countries he believes will have more to gain from stronger growth and healthier macroeconomic fundamentals.
Although he says countries with large current account deficits such as Turkey will underperform.
These are plausible and audacious predictions, I shall hold him to account when I re-read this post in December.