Weekly international investment round up to January 12, 2010
Following last week’s review of 2009, it’s time to dust off the crystal ball once again and speculate on those events which could help shape 2010. This has become somewhat of a regular feature over the years resulting in a fair degree of success.
Last year I attempted a similar exercise in my article ‘Outrageous Predictions for 2009’ at a time when America’s President elect had yet to be sworn in, the world’s leading economies were in deep recession and the very financial system had only just narrowly avoided complete meltdown. Last year’s first prediction aimed to close the circle from two years before when back in pre-credit crunch January 2007, during a time when the US was still enjoying the tail-end of its last boom, I suggested America would be in recession by that year’s end, this indeed happened.
However, in January last year I suggested that although the year ahead would not be easy for the new President, the US would pull out of recession by the end of 2009.
Spurred on by Obama’s unprecedented stimulus package America pulled out of recession in the third quarter allowing all the major US stock markets to finish in strongly positive territory. My second prediction concerned the world’s third largest economy, China. I suggested that their stunning previous years GDP growth of 9.6 per cent would fall in 2009. This indeed happened but not by suggested 50 per cent, final figures are likely to show final Chinese GDP growth at 8 per cent for 2009. With oil prices at around $45 a barrel in January 2009 my prediction was for its price to slip lower before rebounding and for gold prices to shine by at least 10 per cent from its then value of US $827 per ounce. Oil prices did exactly that, finally finishing some 80 per cent higher while gold hit a record high in 2009 with a gleaming 24 per cent price increase.
If 2009 was when the medicine was applied to the comatose patient resulting in a short term adrenalin rush, 2010 may be the year for bloodshot eyes and hangovers but tricky years are often an investor’s best friend and there should certainly be opportunities ahead. 2010 is likely to be the year China over takes Japan and becomes the world’s second largest economy, a new decade a new dynasty. Oil prices hit US$100 a barrel (again) and along with Malta, the UK finally exits recession but this fails to save the UK government after a closely fought May election. A new round of merger and acquisitions are likely to begin and could include some very familiar names. Don’t be surprised to see online giants Amazon and eBay complete a tie-up, phone makers such as Nokia and Motorola may also consolidate while events may drive VW and GM closer together. However, gold is unlikely to complete its ninth consecutive year of growth, high unemployment breaks the US Social Security system sending their taxes higher while rising global food prices and a sniff of higher interest rates towards year’s end has predictable consequences but 2010 will offer opportunities and opportunities tend to multiply as they are seized.