Around the turn of the year, media outlets feature predictions of what lies ahead for the economy, financial markets, and investments. Some people may discount such year-end prognostications because they don't believe the future can be foreseen.
Just look how far off economists, market strategists and other soothsayers have been in the past, they argue.
While it may be true that most forecasters end up being wrong, non-believers often overlook the fact that some people - a minority to be sure - can accurately predict the events that unfold. Take the financial crisis of 2008: several economists and market strategists did see it coming, as conveyed in the Dec. 7, 2006 article, ' Is a financial crisis overdue? '
Note, in particular, the warning issued by former U.S. Federal Reserve chairman Paul Volker:
"The U.S. is skating on increasingly thin ice. There are disturbing trends, huge imbalances, disequilibria, risks - call them what you will. Altogether the circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot."
If we cast the net wide enough, perhaps we'll come across some forecasts that resonate like Mr. Volker's did. With this in mind, 25 capsule-sized forecasts for 2010 and the decade ahead are offered below. For more, check out an exhaustive guide published on the blog of The Pragmatic Capitalist http://pragcap.com/the-ultimate-guide-to-2010-investment-predictions-and-outlooks. You'll find another four dozen or so additional forecasts, which, when added to the nearly two dozen here, yields about six dozen (72) in total.
Forecasts for 2010:
1. The Canadian housing market will be "exceptionally hot" in the spring as people rush to buy "ahead of the new HST [harmonized sales tax]in Ontario and B.C. and in anticipation of interest rate increases." Douglas Porter, deputy chief economist, BMO Capital Markets.
2. "The improving economy should support the outperformance of mid- and late-cycle sectors, such as technology, industrials, energy and materials, when interest rates rise in the latter half of 2010." Vincent Delisle, director of portfolio strategy, Scotia Capital .
3. "While indicators point in different directions, various measures, such as forward price-earnings ratios, suggest that equity prices may have increased by more than warranted in the context of an expected slow recovery." Bank of Canada.
4. Increasing complacency in financial markets will bring the Volatility Index (VIX) down from 22 to 14. David Karsboel, chief economist, Saxo Bank.
5. U.S. regulators will restrict mutual-fund trailer fees; shares in mutual-fund companies will plunge. Doug Kass, general partner, Seabreeze Partners.
6. "The dollar will find support from Federal Reserve tightening and from the growing realization that the economy is getting stronger." Scott Grannis, retired economist (Western Asset Management).
7. "Health care will greatly outperform the S&P 500 in 2010," as uncertainty over health care reform is cleared up. James Altucher, managing partner, Formula Capital.
8. "With our weekly leading indicator rising to a 17-month high as its growth rate re-accelerates, a resilient economic recovery is poised to persist well into the New Year," Lakshman Achuthan, managing director of the Economic Cycle Research Institute.
9. "Iran has until the end of January, 2010, to offer a compromise on its nuclear program. …The risks of an escalating confrontation will rise … Iran will be one of the biggest stories of the year." Lionel Barber, editor, Financial Times.
10. The economic recovery will be more robust than expected because the Great Recession created a great deal of pent-up demand and spare capacity. James Grant, editor, Grant's Interest Rate Observer.
11. The S&P 500 Index will fall below its March low as expectations of a recovery are dashed by economic updates. Eric Sprott, chief executive officer, Sprott Asset Management.
12. "The moment this fear of deflation turns into a fear of inflation … interest rates rise will in the long end … we are heading … into stagflation." George Soros, chairman, Soros Fund Management LLC (interviewed on Yahoo Tech Ticker).
13. "Regrettably, unless the U.S. and other advanced industrial countries make much greater progress on financial-sector reforms in 2010 we may find ourselves faced with another opportunity to learn them." Joseph Stiglitz, professor, Columbia University.
14. "Why do we not see more robust growth for 2010? Because the private financial system appears to remain incapable of creating net new credit. …The contraction in credit [during 2009]is unprecedented." Paul Kasriel, chief economist, Northern Trust.
15. "There is still close to an 80-per-cent probability that a second market plunge and economic downturn will unfold during the coming year … the evidence [suggests]a more drawn-out and painful deleveraging cycle." John Hussman, Hussman Funds.
16. The mountain of cash earning next to nothing on the sidelines may support corporate bonds and other high-yield instruments. Scott MacDonald, head of research, Aladdin Capital Management LLC.
17. Gold is at risk of a correction given that central banks may be compelled to exit their stimulative policies, bouts of economic weakness and an unwinding of the "carry-trade" that has depressed the U.S. dollar. Nouriel Roubini, professor, New York University
Forecasts for the decade ahead
18. Because of the Great Recession and difficulties in withdrawing stimulus, there will be higher cyclical volatility, lower trend growth and more frequent recessions in the 2010s. Lakshman Achuthan, managing director of the Economic Cycle Research Institute.
19. Despite the recession, U.S. profit margins are at record levels - U.S. profits are therefore likely to disappoint expectations over the next few years as margins fall back. Andrew Smithers, chairman, Smithers & Co.
20. Overweight commodity stocks because of the industrialization of the emerging economies, constraints on supply, and the protection real assets provide against currency debasement. Don Coxe, chairman, Coxe Advisors LLC.
21. "The problem is not solved. They're only making it worse. Countries that take the pain [let bankruptcies correct mistakes]move on. The U.S. is following the Japan model." Jim Rogers, legendary investor (interviewed on Yahoo Tech Ticker).
22. "Inflation-protected securities can benefit if and when the government's efforts to reflate take hold … break even-inflation rates are currently signalling [low inflation]or the next 10 years. It's possible, but not likely." Bill Gross, managing director, PIMCO.
23. "China's Premier, Wen Jiabao, had it right when he worried … [about]a China that was 'unbalanced, unstable, uncoordinated, and unsustainable' … the answer lies in shifting away from export-led growth." Stephen Roach, chairman, Morgan Stanley Asia.
24. "By the year 2020, an instance of bioerror or bioterror will have killed a million people." Sir Martin Rees, president of the Royal Society of London.
25. "By the year 2020 solar electricity will be as cheap as or cheaper than that produced by fossil fuels." Robert A. Freling, executive director of the Solar Electric Light Fund.
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