5. Commodity ETFs will climb.
Our prediction is that this love affair with low prices is going to be short-lived.
Even Jim Rogers, says not to count out commodities, now or ever. That’s because the credit crisis is creating an inability for farmers to get loans, which means they can’t grow. This will lead to supply shortages, after which high prices ultimately will follow. Food demand is expected to increase, as populations in emerging markets boom and many of those areas adopt a more western diet. Staple commodities, such as corn, soybeans, wheat and sugar could very well continue to see historic levels of demand.
Meanwhile, one positive side effect to the high prices is that people may finally get serious about alternative energy, thanks to skyrocketing costs of oil and Obama’s push for a greener lifestyle. Unfortunately, many feel that this break in oil prices will be short-lived, and demand will resume again at some point, driving the price back up.
6. In recovery, small-caps and value will see action.
Those areas of the markets that were the most beaten-up in the downturn stand to outperform in a recovery. These little companies got badly beaten down in the recession, and they’re going to come back stronger than ever, thanks to their nimbleness. They’re likely not as bogged down by in-house red-tape and bureaucracy, leaving them in a position to react more quickly to market changes. The value side of the market should reveal good bargains when the turnaround begins, too.
7. Investors will wise up about fees.
In fact, investors already are. Many people have seen their portfolios savaged in this market, and we’ve seen people take an interest in their investments like never before. They’re starting to ask questions about where that money is going, they want to know what they own, and they want to know what it’s costing them. These are great things to ask, because it’s going to put the pressure on fund companies and 401(k) providers to not only deliver fair pricing, but to explain that pricing in plain English.
A fee-disclosure rule is expected to go into effect on Jan. 1, which could wind up assisting in the effort to get ETFs into 401(k) plans. The Department of Labor’s rule states that plan fiduciaries have to disclose fees and performance numbers in plain English so that consumers can make an easy comparison of their options.
8. ETF provider competition will heat up.
This year, we saw a number of ETFs liquidate. As the industry grows, we could be seeing more of this. It’s not necessarily a bad thing – after all, not every single fund that is launched can be a success. It isn’t a death knell. The ETF industry is like any other – some products will be successes, others will fall flat. The reasons are numerous: poor product concept, poor timing, poor marketing or just plain bad luck.
9. ETFs will surpass $1 trillion in assets.
This will be thanks to a market recovery, new and interesting launches and an overall investor shunning of mutual funds. As of November 2008, there was $487 billion in both ETFs and ETNs. ETFs have managed to experience net inflows, even in the market downturn. Just imagine how they’ll perform during a boom cycle.
10. Emerging markets bounce back.
Some of these countries had the unfortunate side effect of being dragged down along with the United States, such as China and India, but they’re strong, well-positioned countries in their own right. They’re rich with growing populations, intellectual capital, a growing middle class and growing urban centers. These factors will serve them well when the global economic recovery begins.