Britain’s departure from the European Union will turn into a chaotic mess. Trade tensions will escalate after President Trump fires off a few bonkers late night tweets. A couple of retail chains will go bust, an Italian bank will run into trouble, and the EU will fine Facebook/Amazon/Apple five/10/20 billion euros (delete as applicable). There are plenty of things we already know will happen in 2019, but what are the real black swans, the events that no one is thinking about but that will genuinely rock the markets over the next 12 months?
Trump might hand over to his vice-president, Daimler could merge with Volkswagen, Emmanuel Macron could launch a “parallel franc,” the tech giants could start to consolidate, and the Greens could take power in Berlin. Any of those really would be a game changer, and would catch just about everyone off guard.
Every year throws up at least a couple of curveballs, events that weren’t on anyone’s radar but that have the power to reshape industries or economies. No one really expected a bizarre, leaderless Right/Left protest movement to convulse France; or the crypto currencies to collapse in value; or that Carlos Ghosn, the boss of Renault-Nissan, would be arrested in Japan, triggering the potential unravelling of the auto industry’s biggest and most powerful industrial alliance. So what could be lurking below the surface to take us all by surprise in 2019? Here are five possibilities.
Donald Trump hands over the keys to the White House. With the first primaries of the 2020 presidential race only a year away, there is already plenty of speculation about who the Democrats might pick to run against Trump and indeed whether any senior Republicans will decide to challenge him for the nomination. But who says he is really running? One thing we know for sure about Trump is that he is a maverick, self-obsessed egotist who is hardly even a politician, and has the attention span of a toddler with a tantrum. Amid mounting scandals and investigations, with threats of impeachment, and with a looming recession and bear market tarnishing his legacy, The Donald could decide he was ready to spend more time on his casinos, golf courses and reality TV shows and pass the gig on to his vice-president, Mike Pence.
A mega-merger in the German car industry. China’s fast-growing and aggressive Geely has already built up a near 10 per cent stake in Daimler, the manufacturer of Mercedes. Is there a point to that holding? Only if it decides to launch a full bid one day. With the DAX in a bear market, and all the automakers under pressure from the rise of electric and self-driving vehicles, there may never be a better time to make a strike. The trouble is, the German government will never allow the jewel in its industrial crown to fall into the hands of the Chinese. Berlin will orchestrate a hurried merger with Volkswagen to create the world’s largest car manufacturer, and one in which the state retains a controlling interest. It is unlikely that will work in the long-term — but it will certainly keep the Chinese at bay.
A French surprise. It is hard to think of a more beleaguered figure than France’s Emmanuel Macron. His approval ratings have been shattered, the economy is stalling and his plans for reforming the eurozone have come to nothing. And yet, he has a flair for the unexpected. Why not steal an idea from the “populists” on the other side of the Alps and launch a “parallel franc”? Paper IOUs backed by the government, much as proposed for Italy, would allow him to increase benefits and public spending, and reflate a stalling economy, without breaking eurozone budget rules. Coupled with his reforms, it might even kickstart French growth. A risk? For sure. But it might be better than a couple more dismal years of protests and austerity, then defeat in 2022.
A radically pro-environment government taking charge of Europe’s largest economy would be a shock to business
The consolidation of the technology industry. After a quarter century of stunning growth, a combination of mounting regulatory pressure and managerial exhaustion means that expansion will suddenly become a lot harder. The response? Start a round of mergers. Amazon could buy Spotify and Uber, while Apple buys Tesla and Netflix, and Google’s parent Alphabet takes control of Facebook. The result? Bigger, although not necessarily better, companies, with formidable powers to generate cash for their shareholders.
A surprise in Berlin. With the collapse of the Social Democratic Party, the Greens are becoming the main centre-left force in Germany, getting close to 20 per cent in some recent polls. If Angela Merkel’s fragile grand coalition collapses, that will trigger fresh elections and the Greens could emerge as the second-largest party. Crucially, it may be the only one capable of forming a coalition, combining with the rump of the Social Democrats and the Left Party. A radically pro-environment government taking charge of Europe’s largest economy would be a shock to business — as would the raft of new taxes and controls a Green-led administration would introduce.
Of course, there are many other things that might surprise us in 2019. The U.K. might cancel Brexit. The African National Congress might lose power in South Africa. Brazil’s new president, Jair Bolsonaro, might finally unlock the economic potential of that vast country, while investors might finally discover Poland, the first country to upgrade to developed market status in a generation. All we can be sure of is that plenty of things will happen, and very few of them will have been foreseen.