George Soros Economic Predictions for 2017
If you want to get a good idea of where the stock market is going in 2017, it might be a good idea to see what the “smart” money is doing. In this case, it’s George Soros, the founder of the $4.5-billion Soros Fund Management LLC and the 23rd wealthiest person in the world. What is George Soros predicting for 2017?
Soros has a comprehensive understanding of the U.S. and global markets, and the U.S. economic outlook for 2017. Soros famously made $1.0 billion in a single day, back in 1992 when he bet against the British pound. So we know he’s not afraid to make a big bet on something he’s sure of, even if the prevailing wisdom suggests otherwise.
Not that George Soros stock market prediction for 2017 is infallible. After all, Soros lost almost $1.0 billion after Donald Trump won the U.S. election in November. A staunch Democrat and supporter of Hillary Clinton, Soros lost big as a result of the stock-market rally after Donald Trump’s surprise election victory.
Soros made some cautious bets in the run-up to the U.S. election but became more bearish after Trump won. It was a disastrous move, with stocks experiencing a Trump bump, and the rally has continued into record territory with momentum gaining daily.
Soros wasn’t alone though. Analysts had been predicting that, in the unlikely event that Donald Trump won the election, the S&P 500 would experience anywhere from a 10% to 50% drop. A Clinton victory would result in a small two- to three-percent bump.
Why the discrepancy? Many believed Hillary would simply continue down the same economic path that President Obama did. That’s a safe and predictable bet. A Trump victory on the other hand is a complete unknown. He’s a Washington outsider and no-one knows what his policies are or how they’ll play out.
It turns out, Wall Street likes Trump’s economic action plan and believe his tax cuts, fewer regulations, and proposed $1.0-trillion infrastructure plan will be good for the American economy and corporate profits.
That’s why it’s important to keep George Soros’s political affiliation in mind. It’ll be a guiding principle under the newly christened Trump administration.
2017 Marked by Uncertainty and Nervousness
2017 is fraught with uncertainty. The markets may be at record levels, investor optimism is soaring, and the CBOE Volatility Index (VIX), better known as the “fear index,” may be at its lowest levels since 2008, but nervousness abounds. At least for some investors. That includes George Soros.
Soros may be a Democrat but even he has to concede that Trump inherited a weak economy from President Obama. The national debt is over $19.0 trillion and the deficit is at $559.0 billion. U.S. economic growth is tepid; in 2016, U.S. gross domestic product (GDP) was just 1.6%, the lowest since 2011. It’s also down considerably from the 2.6% increase in 2015.
Unemployment may be below five percent, but underemployment is inching its way back up to 10%. Debt levels are also up and savings are down. This comes at a time when the Fed has started to raise rates. This will be tough for those addicted to cheap money. It could also spell trouble for Wall Street. Artificially low rates are widely held to be the fuel that has kept the second-longest bull market running.
Investors are also concerned about a possible trade war with China and Mexico. For starters, Trump has threatened a 35% tariff on Chinese goods. It’s possible Trump could impose a tariff on all imports. No matter where they come from.
There’s also ongoing political uncertainty about how Russia, China, Iran, and North Korea will respond to Donald Trump. In Europe, investors are increasingly worried about Britain’s exit from the European Union and a number of important national elections.
George Soros Predicts Markets Will Fall Under Trump
It is under this umbrella that George Soros is making his U.S. economic and stock market predictions for 2017.
“Right now uncertainty is at a peak,” he said at the World Economic Forum’s annual meeting in Davos, Switzerland back in January. “And, actually, uncertainty is the enemy of long-term investment. So I don’t think the markets are going to do very well.” (Source: “Soros Says Markets to Slump With Trump, EU Faces Disintegration,” Bloomberg, January 19, 2017.)
According to Soros, the stock market rally only has legs because of Trump’s campaign promises to boost spending and slash regulations. But those campaign promises will not amount to anything and the stock market rally will come to a crashing halt.
“I personally am convinced that he is going to fail,” Soros said. “Not because of people like me who would like him to fail. But because his ideas that guide him are inherently self-contradictory.”
Again, Soros is a Democrat who supports liberal causes. He has also called Donald Trump a “would-be dictator.” So you may, depending on your political persuasion, want to take what he says or believes with a grain of salt.
Love him or hate him, George Soros is one of the world’s best investors who have an uncanny knack for predicting the movements of the financial markets; whether it’s from trading stocks, currencies, or bonds, etc.
George Soros Revaluates Portfolio in Fourth Quarter
Investors who manage more than $100.0 million in assets are required to detail changes to their portfolio to the U.S. Securities and Exchange Commission (SEC) within 45 days of a quarter ending. This provides investors with an inside look at where the best investors in the world are parking their money. Is Soros bearish or bullish on the markets and the Trump administration?
The U.S. election took place in early November, this gave Soros more than enough time to rejig his portfolio to take advantage of the Trump presidency. And Soros made a number of major changes to his portfolio in the fourth quarter of 2016. (Source: “Soros Fund Management,” U.S. Securities and Exchange Commission, last accessed February 14, 2017.)
In what I presume were the final weeks of 2016, George Soros reappraised his take of where the U.S. economy was heading. And like all good investors, he wants to profit. Thanks to Trump’s promise of tax cuts and deregulation, the financial sector was one of the biggest areas of promise. President Trump has already taken steps to repeal The Dodd-Frank Wall Street Reform and Consumer Protection Act that was put into place after the 2008-09 Financial Crisis.
Soros Management Fund took new stakes in a number of financial stocks. The fund now holds a stake of 62,100 shares ($14.8 million) in Goldman Sachs Group Inc (NYSE:GS), as well as 139,000 call options, which gives the fund the right, but not the obligation, to buy shares at a set price.
Soros also took a new 179,000 position ($3.95 million) in Bank of America Corp (NYSE:BAC) and dumped call options on 1.37 million shares. One of the biggest buys in the fourth quarter of 2016 was a call option on 3.125 million shares of the Financial Select Sector SPDR Fund (NYSEARCA:XLF) worth $72.6 million.
Financial and bank stocks aren’t the only equities Soros is bullish on. He increased his stake in T-Mobile to 685,700 ($39.4 million). The fund also took a 40,000 stake ($1.96 million) in Delta Air Lines, Inc. (NYSE:DAL) and dumped his holding in United Airlines. Soros also boosted his holdings in Facebook Inc (NASDAQ:FB) ($40.7 million) and Google parent Alphabet Inc (NASADQ:GOOGL) ($15.6 million).
That doesn’t mean Soros thinks all tech stocks are going to do well under the Trump administration. In the fourth quarter, Soros trimmed his position in a number of technology sector stocks, including Amazon.com, Inc. (NASDAQ:AMZN), eBay Inc (NASDAQ:EBAY), Netflix, Inc. (NASDAQ:NFLX), and Activision Blizzard, Inc. (NASDAQ:ATVI).
Soros also sold off his shares in Herbalife Ltd. (NYSE:HLF), Harley-Davidson Inc (NYSE:HOG), PepsiCo, Inc. (NYSE:PEP), and J C Penney Company Inc (NYSE:JCP).
He also offloaded his take in Nordstrom, Inc. (NYSE:JWN), The Coca-Cola Co (NYSE:KO), NVIDIA Corporation (NASDAQ:NVDA), and Procter & Gamble Co (NYSE:PG).
Soros Doesn’t Think Trump Will Make America Great
What is George Soros stock market outlook for the rest of 2017? Soros is putting his money where his mouth is. He does not think the average American will do well under a Trump administration and will have less discretionary income. But he knows that the financial sector will do well.
While Soros made some significant changes to his fund in the fourth quarter, this doesn’t necessarily mean it’s what he’s thinking today. Trump’s inauguration was a month ago, Soros could have made some major revisions to his fund in recent weeks. We won’t know what his current U.S. economic predictions for 2017 are until he releases the fund’s F13 in April.
The only thing that is certain however, is that Soros will still not be a fan of Donald Trump and that the U.S. is in trouble.
What lies ahead for the U.S. economy and stocks according to George Soros? In December, Soros sent out a holiday greeting to friends that read: “These times are not business as usual. Wishing you the best in a troubled world.” (Source: “GEORGE SOROS: ‘These times are not business as usual. Wishing you the best in a troubled world’,” Business Insider, January 24, 2017.)
Donald Trump has become president since then, but Soros’s opinions have not mellowed. At a Davros dinner in January, he expanded on his holiday greeting:
Democracy is now in crisis. Even the US, the world’s leading democracy, elected a con artist and would-be dictator as its president. Although Trump has toned down his rhetoric since he was elected, he has changed neither his behavior nor his advisers. His Cabinet comprises incompetent extremists and retired generals.
What does the future hold?
“I am confident that democracy will prove resilient in the U.S. Its Constitution and institutions, including the fourth estate, are strong enough to resist the excesses of the executive branch, thus preventing a would-be dictator from becoming an actual one.” (Source: Ibid.)
George Soros most certainly does not think Donald Trump can make America great again. But that doesn’t mean Soros doesn’t want to profit from the so-called “would-be dictator.”