After a year of huge upsets, investors make their calls for 2017

Politics, economics and finance have all been turned on their head in 2016, and investors are already looking ahead to 2017 with anticipation and trepidation.

The consensus, broadly, is that the 35-year bull market in bonds is over, inflation is back, central banks are maxed out, and for the first time in a decade any stimulus to the global economy will now come from governments.

The implications for markets appear to be further increases in bond yields, developed world stocks and the dollar, while emerging market currencies, stocks and bonds are expected to struggle under the weight of higher U.S. bond yields.

In equities, developed markets are favored over emerging, cyclical sectors over defensive, banks are expected to benefit from steepening bond yield curves, while infrastructure spending could boost housing and construction stocks.

That's the consensus. But what goes against that grain? Where might the wrinkles appear? And even within the broad consensus, are there any eye-catching forecasts or trade recommendations?

1. Bond yields to FALL?

HSBC, who correctly called the recent slide in U.S. bond yields to historic lows, says bond yields may well rise next year and expects 10-year Treasury yields to hit 2.5 percent.

But in the first quarter.

After that, HSBC's bond strategist Steven Major reckons they will fall back sharply again to 1.35 percent - effectively retesting the multi-decade low struck this year - because an initial rise to 2.5 percent would be unsustainable by tightening financial conditions, dragging on the economy and constraining the Fed. A bold call.

2. "Peak" 2016

For Bank of America Merrill Lynch, 2016 saw "peak liquidity, peak inequality, peak globalization, peak deflation" and the end of the biggest ever bull market in bonds. That all starts to reverse next year. "For the first time since 2006, there will be no big easing of monetary policy in the G7, and interest rates and inflation will surprise to the upside."

They even pin a date on when the bond bull run likely ended: July 11, 2016, when the 30-year U.S. bond yield bottomed out at 2.088 percent. It's 3 percent today.

3. Black Swans

Economists at Societe Generale illustrate a graphic with four "black swans" that could blight the global economic and market landscape next year for good or bad. Mostly bad news. The tail risks they see as most likely to alter next year's outlook stem from political uncertainty (30 percent risk factor), the steep increases in bond yields (25 percent), a hard landing in China (25 percent risk factor), and trade wars (15 percent).

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4. The euro also rises

"The dollar is overvalued versus other G10 currencies." Not something you hear too often, but it's the view of Swiss wealth management giant UBS. They predict the euro will end next year at $1.20, going against the growing calls for parity (it hit a one-year low below $1.06 last week) or even lower. The euro will also draw support from the ECB tapering its QE, while undervalued sterling will pick itself up from its Brexit mauling to rally against the greenback.

5. The "good carry" in EM

Few dispute that a higher dollar and U.S. yields next year will hurt emerging markets. Goldman Sachs has long championed a stronger dollar and higher yields. Two of their top 2017 trade tips, however, involve buying EM assets.

One is going long on an equally weighted FX basket of Brazilian real, Russian rouble, Indonesian rupiah and South African rand versus short on an equally weighted basket of Korean won and Singapore dollar to earn "the good carry". The other is going long Brazilian, Indian and Polish equities.

6. More QE from the ECB?

Inflation has bottomed out, the Fed is raising rates, and other central banks are beginning to reduce their stimulus. The ECB will taper its 80 billion euros-a-month QE program, right?

Maybe not.

RBC Capital Markets expects the ECB to not only extend QE in December, but to consider extending it again later next year as inflation and growth fall short. "Even toward the end of 2017, the discussion will be very similar to that seen at present: how can the ECB continue to stimulate the economy?"

That could widen the already yawning gap between U.S. and euro zone yields. The 10-year spread this week hit its widest in over quarter of a century (210 basis points) and a fall in the 2-year German yield to a record low -0.74 pct pushed the spread to its widest in a decade (185 bps).

7. $1 trillion U.S. earnings bonanza

How much offshore earnings can U.S. companies bring back if president-elect Trump follows through with his pledge to cut corporate tax? About $1 trillion, according to estimates by Deutsche Bank. This could give U.S. stocks, already at record highs, another shot in the arm. Citi reckons global equities will rise 10 percent next year, led by developed market indices. A 10 percent rise in the dollar and cut in U.S. corporation tax to 20 percent could add 6 percent to global earnings per share. "If other countries also cut taxes then EPS could rise further, even against an uninspiring economic backdrop."

(Reporting by Jamie McGeever; Additional reporting by Atul Prakash and Vikram Subhedar; Editing by Hugh Lawson)