2. The consensus is for a positive 2010 year especially in GDP terms ( thats dangerous) and a bear for 2009 turned bullish at the top - Bernstein from Merrill ( now selfemployed) - thats another good indicator for a top. No wall of worry this market can climb on.
Richard Bernstein's 10 Predictions For 2010
Here are my 10 guesses for how the financial markets will shape up in 2010.
1. Stock and bond market returns in the US will again be positive.
2. The US dollar is likely to meaningfully appreciate once market-driven short-term rates begin to rise.
3. US dollar “carry trades” could get killed as 2010 progresses and the US dollar appreciates. Once accounting for leverage, hedge fund performance will likely trail long-only equity performance.
4. The Fed will spend the second half of the year trying to catch up to, and flatten, the yield curve. Short-term rates could increase more than investors currently think. Long-term rates could rise quite a bit in the first part of the year as inflation finally begins to appear, but are likely to fall during the second half of the year when the markets realize the Fed is serious about fighting inflation. The curve is likely to be much flatter one year from today than it is currently.
5. Corporate profits are likely to explode to the upside during 2010. Trailing four-quarter S&P 500 reported earnings growth could exceed 100%. Investors still seem to be under-estimating the operating and financial leverage that is built into corporate profits.
6. Employment in the US will probably continue to improve. Consumer Discretionary stocks will likely be among the best performing sectors.
7. Treasuries will probably underperform stocks. That underperformance is unfortunately likely to reinforce both individual and institutional investors’ views that it is wise to be under-diversified.
8. Small cap value, I think, will be the US’s best performing size/style segment. Small banks outperformance might be the biggest surprise for 2010.
9. Financial regulation will progress, but the bull market will probably aid politicians’ “forgetfulness”. As a result, new regulation could be relatively meaningless. In my opinion, serious regulation won’t occur until after the next downturn, which could be worse if no meaningful new regulation is implemented in 2010.
10. I think the Democrats will do better in the 2010 mid-term elections than people currently think they will. It seems very likely to me that in December 2010, investors will look back on the year and realize that monetary and fiscal policy stimulus still works.
3. The Dollar short trade about to generate more headache and help to bring stocks lower as the optimism producing conjunction of Jupiter Neptun and Chiron comes to a third a final date at the 21st Dec and fade away leaving us with very destructive forces mostly in 2010 ( read earlier posts).
The visions of a better world are gifts of the third and final conjunction of generous Jupiter and spiritual Neptune. This idyllic couple reconnects on December 21, giving wings to hope that raises our sights above the burdens of the present to visualize a more rewarding future. This is a signal to look past the limits of present circumstances to catch a cosmic wave and ride it into the sky. Inspiration touches hearts and minds, dissolving dilemmas and replacing them with magical landscapes of faith and fulfillment.
The darker side of the planetary story is told by terrible Pluto’s conjunction with the Sun on December 24 and a New Year’s Eve lunar eclipse in cuddly Cancer. Potent Pluto is also making a stressful 90-degree square with stern Saturn that symbolizes the tightening economic climate. Clearly, we are facing the limits of our culture and need to make major adjustments or watch it go off the rails, perhaps for good. The December 31 lunar eclipse is a reminder to dry our tears, let go of the past and commit to working harder in the year ahead.