2009 Market Outlook: I'm Taking the Middle Road

As 2009 begins and the predictions for the year start, we’re hearing gloom and doom or sunshine and roses. I’m taking the middle road. Why you ask? Because, I try to look at both sides of an issue before making my decisions. And here’s why:

Stock Market: I’m looking at a gain for the year of about 3% - 5%. The first part of the year will be a continuation of 2008 with more loses as 4^th quarter figures start coming in. After that, I’m looking for a slow rise as investors start buying. 401(K) investments will increase as people will finally begin to realize that their money will go farther this year in regards to their retirement savings.

Job Market: Agreeing with other analysts, I’m looking at an 8% unemployment rate, maybe even by the end of the first quarter. Then a slow drop through the 3^rd quarter and possibly a larger drop during the 4^th quarter as holiday sales call for more seasonal employees. Also, I think our new President will be instituting new policies that in turn will help create new some new jobs.

Economy: I'm predicting a little pick up for the second half of 2009. OPEC’s production cuts will start to be felt in the coming months. I think the price of oil will rise modestly then level off. $50 a barrel sounds about right to me. As unemployment begins to drop, the economy will start to pick up. Also, consumers have been putting off non-essential purchases. Small splurges will begin and the start of a ‘trickle up’ effect.

Housing: Because I’m looking at a rise in unemployment, foreclosures will rise into the 2^nd quarter, and then level off as well. As banks begin to loosen up on their lending, refinancing will increase. Although housing prices will fall early in 2009, they will begin to stabilize. As fear of losing your job decreases, people will begin to start buying again.

Disclosure: none

Comments

[John Cordes:]

I see a dart board. I see a blind fold. I see predictions without predications, justifications or analysis. I see erronious conclusions.

Jan 04 08:56 AM

[jdett:]

How do think the next wave of foreclosures will affect the markerts?

www.cbsnews.com/video/...

Jan 04 11:30 AM

[henarl:]

51.5% of all predictions will come true someday, plus or minus 63.7%. More or less. Invest accordingly.

Jan 04 02:26 PM

[Urbane Gori...:]

jdett:

More foreclosures will have pin-action (to borrow from Jim Cramer). Obviously, it will impact financial institutions as well as reinsurers. There will be more impact on 'credit default swaps, which will hit the bottom line of retirement funds, endowments, cities, states and insurance companies that have invested in them for the 'big returns'.

Because lenders will have to clean their inventories of foreclosures, expect a further drop in home prices. As home prices are hammered, expect that people can borrow less and lenders will become tighter in their standards. Expect a further reduction in borrowing for cars, boats, vacation homes, vacations, major appliances and remodels, etc..

That would indicate further slowdown in manufacturing, installation, sales and the like. Ergo, more unemployment.

More unemployment... More foreclosures.... If you're trying to catch the brass ring as this merry-go-round continues to pick up speed, consider shorting companies that will suffer, or cautiously use inverse ETFS like SRS or SKF... And maybe look at companies that will benefit from lower commodity prices as consumption drops further.

Happy motoring! Gee! You're doin' a swell job Dubya!

jegan ;-)

Jan 04 05:00 PM

[Kunst:]

Hey Goldilocks, long time no see!

They say the only thing in the middle of the road is a dead armadillo.

My view on your predictions: none of the above.

The stock market will goose up some in the next month or so, as people seem to really believe that amphetamines can revive a heart attack victim. That will wear off gradually as the realization sinks in that nothing fundamental has changed. Then the massive load of bad news that is barreling down the road (like more foreclosures, business failures, and job losses) will kick the legs out from under the market again.

The economy is sick and getting sicker. That isn't going to change because of a bunch of government spending. BTW, where is all that money coming from? We're going to borrow it from our friends overseas, right? Maybe they start to have second thoughts about that. Our current account deficit is only $700 billion a year and we need to borrow a trillion. They wonder about our ability to repay. Hmmm. Well, our friend Ben over at the Fed can help out. He has an unlimited supply of dollars. He'll buy some of those treasuries, as much as necessary. Helps keep interest rates down, you know.

Of course all that extra money he creates might have an inflationary effect, but voila! That's exactly what we need! Inflate prices back up and all our problems go away. House prices are back up, owners have equity again (banks breathe a sigh of relief), foreclosures are a thing of the past, the dollar drops, employment rises as American industry becomes price-competitive again. Even stocks go up, if you ignore real-dollar prices.

It's funny how most predictions amount to "more of the same". Dust off those January 2008 predictions and see how that worked.

Jan 04 05:21 PM