Weekly international investment round up to 20 January 2009
• What events could shape 2009?
• Will the US pull out of recession, will China continue to grow and will oil slip while gold shines?
Following last week’s review of 2008 it’s probably now appropriate to gaze into the crystal ball again and make a few predictions for the year ahead and speculate on those events which could help shape 2009.
Based upon available data at the beginning of last year I attempted a similar exercise in my January 2008 article, entitled ‘Outrageous Predictions for 2008’ and looking back, I believe this was unfortunately somewhat successful.
Set against the backdrop of what had happened in 2007, I made 3 predictions for the forthcoming year. Following China’s amazing economic growth over previous years including an amazing 97 per cent increase on their country’s main index in 2007, I suggested they were set for a heavy stock market fall during 2008 by as much as 40 per cent. In fact, this then happened only a few months later with their CSI 300 index eventually finishing the year 66 per cent down.
My second prediction was that after many years of continued expansion, UK growth would turn negative by years end as the credit crunch hit over-extended British consumers hard, alas this has indeed happened.
My third, and as stated at the time my ‘wildest guesstimate’, concerned who would be elected US President. Back then, their two main political parties had not even elected their own leaders but I had suggested someone who’s ‘libertarian, anti-war platform together with his candid approach to the US economy is likely to boost his popularity, particularly if the US continues to experience an economic slowdown’ would win the election. Incorrectly however, I went for a guy could Ron Paul instead of Barack Obama. Now, in the very week Mr Obama is sworn in as President, I am very happy to be wrong!
So, onto 2009. Using all available data including some interesting reading issued by institutions such as Saxo Bank, what could lie ahead? The first attempts to actually close a chapter from two years ago. In my ‘Outrageous Predictions for 2007’ article, printed at a time when the US was still in their boom cycle, I predicted that the ‘US would be in recession at years end’. Confirmed by data only released by the National Bureau of Economic Research (NBER) two months ago, the US did indeed enter the current recession in December 2007. I now suggest that the US will come out of recession by this year’s end. However, it will certainly not be an easy ride for the new President as things look set to get worse before they get any better.
The second concerns the world’s third largest economy, China. They will see their stunning growth dramatically stall as their GDP falls by half this year. Oil prices may slip to $25 dollars per barrel before rebounding while gold is set to shine by at least 10% in 2009 from its current value of $827 per ounce.
Also, major developing stories could centre on chaos in the global currency markets (including the euro), economic carnage in Eastern Europe and high social unrest among the world’s poorest citizens.
If true, 2009 will certainly contain its share of threats and opportunities for every investor.
This article does not intend to give investment advice and its contents should not be construed as such. Information in this article has been obtained from various public sources and is given by way of information only. Readers are always encouraged to seek financial advice before making any investment decision.