Market Predictions For 2009
If you’re like most people 2008 was a rough year. Many have lost a significant chunk of their net worth. Others have had to postpone retirement because of the financial meltdown. Millions of homeowners are now underwater… and sinking fast.
It’s been a rollercoaster ride many want to forget.
Everyone’s feeling the pain. I have more than a few friends who don’t even open retirement account statements anymore. It’s just too painful. Enough about the past.
The big question today is: “What does the future hold?”
I’m looking at early 2009 and I see some great ways to make money. Savvy investors can profit from the huge trends setting up now. So, what trends am I seeing now? A flat market with continued volatility, strength in the US Dollar, a falling bond market, and the eventual resurgence of commodities.
I know some of these seem optimistic, but bear with me and I’ll explain my thinking.
First off, the market. We’re down big over the last year. That’s no surprise. There’s numerous causes include deleveraging from the financial meltdown, the real estate crisis, and a global recession. None of this is going away in early ‘09.
We might see optimism, but these are big issues that’ll take time to resolve.
That’s why the markets will be flat, but very volatile. The markets will be range bound for several months… a great opportunity for traders.
The financial markets are tied to the banking system. With the government doing all it can, the banking system appears to be stable. However, I wouldn’t be surprised to see a handful of banks taken over by the FDIC in the early part of the year.
The global credit crisis will also impact the markets. The biggest impact will be on the US Dollar however. Other countries are in the midst of the global recession. The emerging market economies are nowhere near as well developed as the US. As a result we’re likely to see these emerging markets struggle with the recession.
And that means a strong dollar.
Now, I’m not expecting the dollar to be strong forever. It will last only as long as investors are concerned about the credit crisis and global economy. Once those issues are in the rearview mirror, I’d expect the dollar will fall in value (probably near mid-year).
The bond market is another area that’s going to change in ‘09.
Government bond prices are jumping ever higher. It’s the impact of fear from investors. As demand skyrockets, the price of government bonds goes up and the yield down. Right now short term maturities are paying just over 0%…
Yes, you read that right.
You get virtually no return for investing in short term bonds. This means two things. First, as fear subsides and greed returns, investors will start buying equities… and selling bonds. Second, anyone who started 2008 with a nicely balanced stock and bond portfolio are now seriously out of whack. That means selling bonds and eventually buying stocks, to balance back out.
That’s why government bond values have only one direction to go… lower.
That leaves us with one last area of concern, commodities.
Everyone knows what happened to oil prices this year… I can still remember paying $4.00 for a gallon of gas. Now, the fear of a global slowdown is pushing oil prices lower. Everyone’s consuming less oil, even China. As the recession spreads and deepens, oil consumption will fall even further.
With supply cuts, I see oil prices remaining volatile. However, oil will be relatively range bound for the first part of the year.
Once the credit crisis and the recession appear to be improving, we’ll see the markets loosen up a bit. I’m watching oil consumption in China closely. The Chinese have been cutting back on oil consumption. When that trend reverses, it’s a big sign oil prices will be heading higher.
So that’s a quick rundown of what to watch for in early 2009.
Now your question should be “How do I profit from these trends?” That’s the easy part… Just keep reading the Dynamic Wealth Report. We’ll cover all of these topics and many more in greater detail all throughout 2009. Till then, have a happy holiday from your friends at Hyperion Financial Group.
Category: Stocks
