My Comment: Yes, this is another laundry list. But in the absence of any profound strategic thoughts this morning (my internet died for a couple of hours), here are a few ideas that may or may not come to pass. Personally, I’m optimistic about this year on many fronts.
By Kevin Mahn, Contributor to Forbes Magazine
Following a year of heightened stock market volatility marked by global political uncertainty, here is my current outlook for the economy and markets in 2012, where more volatility and political uncertainty is expected:
1) Expected continuation of slow, but steady, growth for the U.S. economy, call it an extended “U-shaped” economic recovery.
2) Consumer sentiment continues to rise but then stagnates as we get closer to the presidential election cycle–leading to a lack of substantial consumer spending necessary to build a sustainable economic recovery in the U.S.
3) Consumers, as well as state/local governments and businesses, continue to deleverage while refraining from taking on new debt, which furthers constrains spending growth.
4) Larger companies with strong dividend histories within traditionally defensive sectors (such as utilities, health care and telecommunications) should fare well given the expected slow growth environment. Should economic growth exceed expectations (i.e. GDP annualized growth of > 3.0%), depressed cyclical sectors such as Basic Materials and energy should perform well.
5) Expectation for consistent, but not staggering, earnings growth by U.S. companies, many of whom possess exceptionally strong balance sheets with overall record cash balances now exceeding $2 billion. Positive earnings surprises, in areas such as autos where there is pent-up consumer demand, could provide sparks for short-term market rallies.
6) Bond yields, while edging higher, likely to remain at historic lows–at least through the end of the year–perhaps being maintained by intermittent flights to quality spurred by market volatility in addition to the previously telegraphed liquidity intentions of the Federal Reserve.
7) Growth investors may continue to turn to gold, and perhaps silver, as an alternative to U.S. Treasuries, for “flights to quality/safe haven” trading opportunities during periods of heightened volatility throughout the year.
8) More noise to come from the European debt markets, potentially leading to a further tightening of the credit markets and concerns over the future of the euro currency.
9) Demographic trends place continued pricing pressures on certain commodity types (examples include agriculture, energy and industrial metals) despite a lackluster economy and elevated prices that exist for specific commodities–which could be offset to a degree by weakened demand/slower growth in China.
10) Real growth takes place away from developed markets in well positioned emerging markets such as Brazil and Colombia in Latin America, Turkey and Egypt in the Middle East and Indonesia and China in Asia.
11) Slight improvements on the jobs front (primarily in a further reduction of initial jobless claims as opposed to a significant reduction in the unemployment rate) and gradual, yet no material, improvements in the real estate market on a national basis.
12) Despite a non-robust economy, an unclear domestic political picture and lingering European debt risks, the stock market can, and should, still do well in 2012 and growth investors can benefit from a well diversified portfolio built to withstand the many fits and starts that are expected throughout the year.
Given the many moving pieces in the complex, global investment puzzle, I believe that investors would be wise to revisit their asset allocation strategies at the beginning of this year to help ensure that they have the diversification in place to withstand potential periods of heightened volatility as well as the breadth of asset classes and sectors to help deliver risk adjusted growth opportunities.
My goal is to give you every financial insight you need to be successful financially, and to contact me if you need any help, no strings attached. Good luck!
Dull, Dithering Romney Clings On
My comment: The Republican presidential march is now in Florida. In a few days, the Republican party of Florida will have identified it’s candidate of choice in this years presidential election. The article that follows came from The Financial Times, a publication out of Great Britain that is usually focused on business, economics, etc. It’s informative to have a perspective on what happens here from across the Atlantic.
But going forward, our economic future will be, to some degree, determined by who wins the White House this fall. The downside is we have to listen to all this blather on TV for the next nine months. Oh well. Regardless of the outcome, we will all survive and probably thrive. At least that’s my plan.
By Edward Luce
This time last week Mitt Romney was the inevitable Republican nominee for the US presidential election. As he was this time last year. Now everyone is suddenly advising the “King of Bain” on how to save his campaign.
First, a somewhat rash statement: Mr Romney is still the most likely nominee. This has very little to do with his campaign, which has been consistently uninspiring and reactive. It has everything to do with the fact that any of the other three candidates, Newt Gingrich included, would be disastrous against President Barack Obama. And it is probably too late for someone else to enter the race.
There is little need to dwell on Ron Paul, whose cultish support base has a ceiling as firm as its floor. The prospect of a Paul “end the Fed” nomination is so far-fetched it does not even horrify the Republican establishment – if it can still be described as such. If the primaries ended up in a brokered convention, where no candidate had a majority of delegates, Mr Paul would have clout. But that is the best he can expect.
Rick Santorum’s prospects are only marginally better. He has only once received more than a fifth of the vote – in Iowa – and nationwide has never climbed above the teens in the opinion polls. Republicans know that his biblical social views would be unpalatable to most Americans.
Which leaves two alternatives: Mr Gingrich or a knight in shining armour. The latter is beginning to pop up in people’s dreams. One possible is Jeb Bush, the family’s next scion, who has remained pointedly neutral in the run-up to his home state primary in Florida next week. Another is Marco Rubio, the Cuban-American senator from the same state and Tea Party darling, who has also declined to back anyone. Mike Pence, one of the most articulate conservatives in Congress, and Bobby Jindal, the governor of Louisiana, are also mentioned. Neither has given his endorsement.
Likewise, each of the above knows how few senior Republicans have yet to make a choice. Apart from God, who purportedly called on no fewer than Rick Perry, Michele Bachmann and Herman Cain to run, but who apparently changed his mind on all of them, most of the big figures are holding back. Their lack of enthusiasm is tangible.
Yet a last-minute candidate could just as easily turn kamikaze as offer a way out. They would face the steep task of building an operation from scratch, raising money to match Mr Romney’s war chest, and planning for elections in 20 states within six weeks. An unsuccessful late entrant would be blamed for wrecking the general election. Unless persuaded by broad acclaim, each is likelier to bide their time until 2016.
Then there is Mr Gingrich. Too modest to mention God, he likens himself to the 20th century’s biggest conservative icons. In a debate last week, he said: “Because I am much like Reagan and Margaret Thatcher, I’m such an unconventional political figure that you really need to design a unique campaign that fits the way I operate.” Mr Gingrich’s fondest comparison is with Winston Churchill, a parallel recently bolstered in National Review, the conservative magazine. There are indeed overlapping storylines. For much of his career, Churchill was disliked by conservatives. During the wilderness years, he was also a figure of either fun or resentment among a lot of the general public.
At this point, however, the trail starts to go cold. If Mr Romney’s campaign had been sharper, it would have lost no opportunity to remind voters of Mr Gingrich’s outsized self-regard, the millions he made trading on his name in Washington, and that he is the only speaker to have been punished for ethics violations.
Yet the Romney campaign is distracted. The candidate remains defensive about his wealth. And he is curiously reluctant to turn his private equity past at Bain Capital to his advantage with the world’s most pro-capitalist party.
Most of the Tea Party groups, which have largely also declined to back anyone, sided with Mr Romney when Gingrich allies cast him as a heartless buy-out tycoon. Yet in contrast to his rival, his arguments appear to lack conviction.
“He should have replied, ‘That’s right I’m a turnround specialist, and I have the precise skill set to deal with the bloated bureaucracy in Washington’,” says Adam Brandon of Freedom Works, a Tea Party group.
Even more puzzling has been Mr Romney’s reluctance to publish his tax returns, which he now says he will rectify on Tuesday. People already know of his great wealth, as they did of George Washington, the Bushes, and so on. His dithering has only drawn attention to it.
Something might give in the next few days. Mr Romney’s allies will flood Florida with negative advertisements about Mr Gingrich, and vice versa. The sunshine state is less evangelical than South Carolina. But its grassroots may be equally prepared to overlook Mr Gingrich’s personal flaws if he can stop a Romney coronation. Equally, the process could take on a first world war quality, with one candidate ceding ground to the other across another 47 states.
But in the near future, at least, the logic is unlikely to change – among those whose priority is to oust Mr Obama, the Anyone-But-Gingrich crowd is still banking on Mr Romney. They might have made an unexciting bet but they will do what they can to keep him going.