Welcome to 2012, folks!
Before the holiday I broke down what I believe will be the three keys for investors to watch going into the new year. As you know, I’m a glass-half-full kind of guy, so on this first trading day of the year I wanted to go through three sectors that I think will surprise people in 2012. For the full breakdown of each of these, be sure and listen to today’s podcast!
Housing. Remember that just a few years ago housing was 6% of GDP; today it’s 2%. I believe that we’re finally bottoming out, and I’m anticipating that the housing market will start to creep back up in 2012. Of course, that’s only if—and this is a big if—we can get the banks to start appraising properties the right way and begin to lend again. Keep in mind that a move in housing will also move things like copper, lumber and other commodities.
Manufacturing. Look at the oil-service supply sector, which is building the pipelines that will move all that oil from the Bakken oil fields in North Dakota to the refineries across the country. Or the auto industry, which is again showing signs of life and coming off its best December in five years. We’re building things in this country again, and that is important for investors to keep an eye on as they look ahead to the new year. Like housing, manufacturing is will also have an impact on commodity prices—be sure and watch for these correlations as well.
Financials. The financial sector is undervalued, but it’s probably a lot healthier than most people think. Take Bank of America. They have enough money to pay back every loan they have on the books with plenty to spare, yet they’re trading under $6. Everyone wants to compare our banks with Europe’s, but I’m here to tell you that it’s apples and oranges. I’m looking at some individual banks, but I think the real value play is the XLF, an ETF that offers wide exposure to financials. (I don’t steer clear of all ETFs—just the ones that track commodities and indices!)