Here are eleven predictions for the coming year. You can take them to the bank!
Well, actually, I don’t pay a lot of attention to my predictions. I’m always afraid that they will distort my interpretation of market action. I always want to focus on the market and what it is telling me to do rather than try to predict the market. So I try to not get to wrapped up in my predictions.
On the other hand, I like the intellectual exercise that leads me to a greater understanding of the markets.
Here is how I use my predictions. I will only follow the market based on my Rules that I teach in my courses. However, I will weight the size of the position greater if the Rules and my analysis agree with each other. For example, I may double the size of my position if my analysis and the Rules are both bullish.
* The stock market will move 20% higher. PEs are too low. Earnings are moving higher. Global money supply is back to an easing mode. Buy the US stock market.
* The US economy will stumble along at about 1-2% through the year. My leading indicators say there will not be a recession but they also say that there will not be a strong economy. This is a good time to start a business as financing rates are low, rents are cheap, and labor is cheap. The company won’t skyrocket right away but you will be positioned for the stinger economy down the road.
* Unemployment will stay very high. Yes, the rate may come down but that will only be due to the fact that fewer people will look for a job. The US economy will not boom because of tax increases and regulatory uncertainty plus the coming recession in Europe.
* Europe will move into recession with weakness mainly on the periphery but with even Germany struggling to stay afloat. Austerity programs, higher taxes, and higher interest rates will weigh on the various economies. Buy European stocks in the middle of the year.
* Global interest rates will stay below 1% in major countries. Weak global growth, little private borrowing, and massive monetary easing will keep rates low for another year.
* The housing market in the US will rebound but will still be historically weak. Houses are very very very cheap. Rents are rising. The population is growing. Buy housing stocks.
* The US dollar will rise. The US is the best house in a crappy neighborhood and has a relatively tight monetary policy. Other central banks are easing while the Fed is relatively stable.
* Inflation will stay muted but there may be a surprise to the upside. The raw material for hyper-inflation is in place but the match has yet to be struck. However, I believe that match will be struck by the end of 2012
* Gold will struggle early in the year but move to new highs by the end of the year. Low inflation and a strong dollar will dampen enthusiasm for the yellow metal but the threat of higher inflation driven by global monetary easing will keep a floor on the price. If it looks like inflation is coming back, look for the price to skyrocket. Buy gold but only when it moves into bull markets. Keep some insurance gold under your mattress.
* Commodities will also generally struggle with a similar situation as gold. However, global demand for better living conditions, particularly in huge but poor countries like China, India, and Indonesia will increase the demand for nearly all commodities so commodity prices will be higher at the end of the year. I will generally play commodities from the downside early in the year but from the long side later.
* Emerging market stocks will outperform developed nations. Global monetary easing, generally growing global economies, and tight float on the stocks will boost performance over the year. Buy emerging market stocks when they move into bull markets.
What do you think? Give me your predictions in a comment below!