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My Predictions For The Stock, Commodity And Forex Markets In 2009
By Sean Hyman on December 23, 2008 | More Posts By Sean Hyman | Author's Website
2008 was a wild and hairy year for sure. Volatility was the highest I’ve ever seen it and also the highest I can ever find on record.
The Dow (^DJI) dropped from over 14,000 down into the 7000s. Oil dropped from $147 down to just under $40. These were some of the fastest drops I’ve ever seen in my life.
So what’s in store for 2009 for stocks, bonds, commodities and currencies?
Stocks finally stabilize and a few “select” sectors will lead the way out!
In stocks, you are going to see stabilization for 2009. In fact, it will likely “base” in a very wide sideways range for much of 2009 as it catches its breath to head higher into the next bull market in late 209 or 2010.
The transportation and technology stocks tend to lead the way higher out of recessions and bear markets. So I would suggest looking into IYT (IYT) (Transportation ETF) or UPS (NYSE:UPS) for an individual stock. In technology, I’d suggest looking to ROM (ROM) (Technology ETF). Keep in mind that this is an aggressive technology ETF and it will be very volatile.
Obama, it appears, will also make the infrastructure stocks hot once again as the government spends money on roads, bridges, etc. So I’d suggest MFD (NYSE:MFD) (Infrastructure ETF) or CAT as an individual stock play. Keep in mind that individual stock plays carry far more risk than an ETF.
Believe it or not, Chinese stocks will once again outpace U.S. stocks. They are starting to recover already as China cuts interest rates, cuts taxes and cuts reserve requirements for the banks. These are all huge steps in the right direction for their economy.
They’ve been very aggressive lately in taking the necessary actions and it’s starting to draw money back into China even now. So I’d suggest iShares FTSE/Xinhua China 25 Index ETF (FXI) as the Chinese ETF to invest in. With such an aggressive emerging market, I won’t suggest an individual stock as I think it is wisest to stick to an ETF here.
The Next Bubble is in Bonds - Specifically Treasuries!
Those are my top picks for stocks in 2009. What about bonds. Well, I’ll be brief here but with stabilization in stocks, I see the eventual “popping” of the “bond bubble” that has formed. That’s where the present bubble is at and it makes it to where bonds aren’t all that safe right now…well let me be more specific. Government bonds aren’t as safe here as far as appreciation goes. I think they will pop at some point in 2009 and bond prices will plummet. So I wouldn’t suggest owning bonds until that bubble bursts.
However, there could be some bargains in corporate bonds as stocks stabilize and recover.
The only recommendation that I’d make here is to be “long” (buy) UltraShort Lehman 20+ Trsy ProShares ETF (TBT) (an ETF that shorts bonds) once the bubble is nearing its top. Right now IS NOT the time for that but it may be in the coming months. Remember, that the Fed may exaggerate this bubble even further as they buy up treasuries in the coming months.
So if you see a real, concerted push up for stocks, then it will likely be time to buy TBT. Until then, don’t get into this one until you see those signs. Don’t be quick to rush into this one.
Believe it or not, commodities stabilize in 2009 courtesy of the Federal Reserve and OPEC!
So what about commodities? I think you will find that oil stabilizes around the $30-$40 a barrel level due to OPEC supply cuts and a slight recovery in demand due to the recession coming to an end by mid 2009. Therefore I’d suggest buying United States Oil ETF (USO) (oil tracking ETF). I think that one is ripe now for a longer term investment.
I also think that the huge sums of dollars that the Fed is printing up and pumping into the economy will re-inflate the economy. As it does, GLD (GLD) (gold ETF) should prosper. So I’d buy it on any major pull back. Keep in mind, that this ETF is extremely volatile. In the ones that I mention that are really volatile, you might want to consider buying smaller positions in.
In general, I think commodities as a whole will stabilize and recover a bit at least by latter 2009. After all, the Fed is creating a ton of money that is being pumped into the economy. So you have a huge sum of money chasing a finite amount of goods. This will eventually kick in and push up commodities once again. Also, this “printing of money” will also dilute the value of the U.S. dollar which will also aid the commodity recovery.
Goodbye U.S. dollar and yen! Hello, Euro & Aussie dollar!
Lastly, what about currencies? Many were shocked in 2008 when I stated that the U.S. dollar and yen would rise.
Now I’m saying that the heyday for the dollar and yen are coming to an end. These were great defensive plays when stocks were sinking but now they will lose their luster as stocks stabilize in 2009. Also, these currencies carry the lowest yields of any major currencies of the world. So there is almost no incentive to hold these anymore.
Foreign currencies will once again rise up against the dollar and the yen, especially the euro and the Australian dollar. The euro is the “first stop’ for currency investors when they flee the U.S. dollar because it’s the world’s next most liquid currency and is also referred to as the “anti-dollar”. So when U.S. dollars start to sink, the EUR/USD ought to be your first pair to buy. Secondly the AUD/USD (Aussie vs. the U.S) pair is the next one to buy.
The Aussies are known for a “commodity rich” land. Therefore as the demand for commodities picks back up and also China’s economy improves, Australia will benefit (since China is a big “customer” of Australia’s goods).
Also, the EUR/JPY (euro vs. the yen) pair will prosper as stocks improve. You will find that this pair “tracks” stocks the most closely over longer periods of time. Therefore, as money runs away from the dollar and the yen and to the euro, EUR/JPY buyers will benefit.
I mention all of these asset classes because it’s good to have a diversified portfolio that encompasses them all.
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I think this is a correct view. Colombus170
Glad you liked the article appreciate you taking the time to read it.
let me know the predictions
The dollar and yen have already begun to tank against foreign currencies and gold and oil have started to rally.
In the coming months, you will likely see stocks follow the lead of these mentioned above.
Thanks for reading and commenting. I appreciate that.
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