phillips49

Success in 2010 Requires Investing in Other Countries

Roger,

Thank you for sharing your insights. Foreign assets do have a place in an individual’s portfolio.

Individuals can benefit from understanding the general trend. It’s easy to get lost in the trees of detail and miss the forest altogether.

In some respects, 2009 was easier to navigate than 2010 will be as I see it. There was so much cash sitting on the sidelines earning zero percent interest, that the money had to go back into the market sometime.

2010 however is much more complicated. The US still has the largest market in the world. Linkage to other markets still exists. That was proved this last go round. Things get a little murky in 2010 with regard to the dollar carry trade and it’s impact on risk assets such as foreign markets. If the US begins to raise interest rates next year, the dollar carry trade will begin to unravel and money may come out of risk assets.

Foreign markets still depend on the American consumer for exports. 2010 will likely be weak recovery year for the US. 3% GDP seems to be the consensus from both the government and private sectors. At 3% GDP unemployment will stay between 9% and 10%. It is still unknown if the domestic economy will be self sustaining after withdrawal of the stimulus. Consumers are also on a savings kick which is unlikely to change as long as uncertainty over unemployment persists. I see the US market as flat to slightly up over 2010.

Like the American market, the easy money has also been made in foreign markets. With flat domestic market, cautious consumer, high domestic unemployment, unwinding of the dollar carry trade, and market linkage, 2010 could be difficult for foreign market investors.

The best approach for the individual investor is to remember the lessons learned from this last crash. Asset allocation, rebalancing, risk management, active portfolio management, disciplined investing, flexibility, get all the information you can and do your own homework.