2008 Investment Predictions
The following are my investment predictions from 2008 (posted December 28th 2007). The 2009 predictions are found at the bottom of the page.
1. We are entering a period of abnormal uncertainty which will result in an
incredibly volatile and challenging stock market environment for the first 10 months of the year. Treasury bonds will outperform the S&P 500 which ends the year with a 5% gain.
All in all, this was a pretty solid prediction. The return on the S&P 500 wasn’t close, but I don’t think anyone could have predicted the hundred year storm that hit this year.
2. The Fed cuts rates to 3% resulting in further dollar devaluation, $1,000 gold
prices and strong commodity prices.
Another solid prediction. Gold soared into the New Year and commodities remained strong into the second half of the year where we became extremely concerned about deflation.
3. The housing market gets substantially worse as price declines deepen and ARM loans reset.
4. Overseas markets experience very high volatility as the “decoupling” debate
wages. In the end, performance is mixed with US large caps outperforming high risk international markets for the first time in over 5 years as investors flee for the safety of “high grade” equity.
5. Hillary Clinton defeats Rudy Guiliani in the 2008 Presidential Election and the
market rallies after the election in anticipation of a “return of the 90s”.
Let’s just say it’s a good thing I don’t make my money managing political campaigns….
6. Global warming remains a major concern in 2008 and the high flying solar
stocks of 2007 experience significant declines in the first half of 2007 before rallying strongly into the Democratic election victory.
Solar stocks tumbled into the New Year, but regained their footing as oil remained high. Not a great pick.
7. At least two well known large cap banks/lenders go bankrupt in 2008.
This is humorous in retrospect. I thought this was a long-shot around January 1st, but as it turns out we lost some of the largest and most respected names in finance this year. Truly remarkable and sad at the same time.
8. 2007 results in the peak in Chinese shares as investors sell into and after the
China never recovered after the market peaked in 2007. Chinese shares fell over 50% in 2008.
9. South Korea is an emerging market winner in 2008 as investors cheer the
election of Lee Myung Bak, a pro-growth conservative of the likes that South Korea has not seen in quite some time.
This was an awful pick. There’s no two ways around it.
10. The Washington Redskins win the Super Bowl.
Maybe next decade.
2009 Investment Predictions
1. The U.S. economy remains in very poor condition throughout the first half of 2009. Stock market volatility remains high and the market remains in a trading range between the 7,500 November low and the 9,500 October 31st high throughout the first two quarters of the year. Ultimately, signs of recovery appear evident by the 4th quarter of 2009 and the market ends the year near Dow 10,000 for a total return of 18%.
2. The jobs picture remains very weak throughout all of 2009. The unemployment rate reaches 10% by the end of the year.
3. Housing remains in a steep decline, though the rate of decline slows substantially by the middle of 2009. The market does not rebound, but false hope of a sharp turnaround appears possible by the end of 2009.
4. The Euro weakens throughout 2009 as the Eurozone economy remains in a deep recession. The dollar makes a surprise rally in 2009 as the U.S. becomes a safe haven currency because the U.S. appears to be crawling out of recession sooner than other nations.
5. Commodity prices stabilize in 2009, but no huge rallies occur as we saw in oil last year. Oil maintains an average price of $50.
6. Foreign stocks are mixed. Europe underperforms the U.S. as its recession deepens, while Asian stocks rally for 20%+ gains in 2009.
7. The Fed is forced to raise interest rates by the end of 2009 as inflation appears to be gaining some traction and the threat of deflation appears to be overblown.
8. Treasuries underperform TIPS (treasury inflation protected securities), as inflation fears cause a sell-off in bonds and a rush into TIPS.
9. The big 3 bailout turns out to be a black hole bailout. The billions in initial bailout money do little to revive the companies and they are forced to consider massive restructurings before getting the hundreds of billions the Obama administration is bound to fork over.
10. Russia experiences a massive fiscal crisis as the value of the ruble tumbles, oil prices remain under $70 and corruption takes its toll on the country.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.