How will the markets go in 2010? It’s clear that 2008 was the year of the banking meltdowns, and 2009 was the year of stimulus packages. So what can we expect next year? Will the rally continue? Or should we read bad news into the good signs?
Next year is likely to be a year of even more massive volatility. Financial services firm Barclays predicts that global equity markets will power ahead in the first quarter of 2010 but will ease back as governments tighten up on economic policies and spending. Gold will settle down to a range of $1,000 to $950 an ounce, the dollar will pick up and oil prices will remain high.
Experts quoted here say markets will be choppy, reaching new highs in 2010 but then falling away as monetary policy and inflation fears kick in. Which really means it’s anyone’s guess. No one knows for sure.
As Standard & Poor’s senior index analyst Howard Silverblatt told the Financial Times, dividends could grow by nearly 9% in a best-case scenario, or fall by 20% in a worst-case scenario. So which way will it go? Silverblatt doesn’t know and he says: “The recovery is going to take years, and there is still a huge downside risk. The range of outcomes is the biggest variance I’ve ever seen. There are huge risks even in the dividend business, and that’s not something the business is used to.”
But you would have to say that the rallies in stocks, government bonds, credit markets and commodities can’t last forever. Governments will be under pressure to tighten spending and monetary policy, and when that happens you can bet there will be a stampede for the exits.
As The Economist says, 2010 may be the year of the exit strategies, in which investors have to contemplate what market fundamentals look like without massive government support. It won’t be pretty and we can expect that will put pressure on asset prices.
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