It’s a brand-new year, which means a host of brand-new, hot-off-the-presses economic predictions. Byron Wien, who seemed awfully prescient with his 2009 predictions, is out with another 10 for the coming year.
Byron Wien, chief investment strategist at Pequot Capital Management, was eerily spot-on in his 2009 predictions, which included:
- The S&P 500 will rise to 1200 (close – it ended the year at 1115)
- Gold will hit $1,200 per ounce (it surpassed that, hitting $1,226.30 an ounce on Dec. 3)
- Oil will return to $80 per barrel (missed it by mere cents: oil closed at $79.36 a barrel)
- Low interest rates and huge borrowing by the Treasury will send the dollar into a downward spiral [He called it right.]
So, he might be worth listening to. With that, here are Wien’s 10 surprises for 2010, as reported by Edward Harrison on Credit Writedowns:
1. The U.S. economy will grow faster than a 5% growth rate. Unemployment will drop below 9%.
2. The Feds decide that the economy is strong enough to move from the zero interest rate policy. In a series of successive hikes beginning in the second quarter, the Federal funds rate reaches 2% by year-end.
- Vanguard Short-Term Bond (NYSEArca: BSV)
- iShares Barclays 1-3 Year Credit Bond (NYSEArca: CSJ)
- SPDR Barclays Capital Short-Term Corporate Bond (NYSEArca: SCPB)
3. Heavy borrowing by the U.S. Treasury and some reluctance by foreign central banks to keep buying notes and bonds drives the yield on the 10-year Treasury above 5.5%. Banks loan more to corporations and individuals and pull away from the carry trade, thereby reducing demand for Treasuries. [What the yield curve means for you.]
4. In a roller coaster year, the Standard and Poor’s 500 rallies to 1300 in the first half and then runs out of steam and declines to 1000, ending where it started at 1115.10.
5. Because it is significantly undervalued on a purchasing power parity basis, the dollar rallies against the yen and the euro. It exceeds 100 on the yen and the euro drops below $1.30 as the long slide of the greenback is interrupted. [Gold, the dollar and the Federal Reserve in 2010.]
- PowerShares DB U.S. Dollar Bullish (NYSEArca: UUP)
6. Japan stands out as the best performing major industrialized market in the world as its currency weakens and its exports improve. [20 years after the bubble: The state of Japan’s ETFs.]
7. Believing he must be a leader in climate control initiatives, President Barack Obama endorses legislation favorable for nuclear power development. This helps job creation and development and reduces costs. [ETFs to play Obama’s policies.]
- Market Vectors Nuclear Energy (NYSEArca: NLR)
- PowerShares Global Nuclear Energy (NYSEArca: PKN)
- iShares S&P Global Nuclear Energy (NASDAQ: NUCL)
8. The improvement in the U.S. economy energizes the Obama administration. The White House undergoes some reorganization and regains its momentum.
9. There is greater consumer protection, more transparency, tighter restriction of leverage and increased scrutiny of derivatives, but the regulatory changes for investment bankers and hedge funds are not onerous. [More on the financial sector.]
- Financial Select Sector SPDR (NYSEArca: XLF)
10. Civil unrest in Iran reaches a crescendo. Ayatollah Khameini pushes out Mahmoud Ahmadinejad in favor of a more public relations adept leader. Economic improvement becomes the key issue and anti-Israel rhetoric subsides. Talks with the United States and Europe begin, but the country remains a nuclear threat.
We made our own predictions for 2010, as well. Check them out here.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.