2010

The January Indicator
The average index gain in years with a positive January close is 12.9%. In negative January years the index has averaged -2.8%.

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2010 Bears to BULLs 5 to 1
Now that the month has passed and we've officially exited "prediction season," what did I discover from this process? Bottom line - bearish predictions outnumbered bullish predictions five to one.

What is noteworthy and unusual about this observation is that following strong performance years, that doesn't typically occur. In fact, the more the market is up in the prior year, the more bullish the predictions tend to be for the next. Recency bias at its finest. But, that was not the case for 2010.

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Themes For 2010
http://www.thekirkreport.com/2010/01/themes-for-2010.html
For the past month I have been collecting posts regarding what others think are themes that we're likely to see play out in the year ahead. While most of these will probably miss the mark (they always do), you may find it of interest to see what others think we should be watching for this year. Enjoy


THE ULTIMATE GUIDE TO 2010 INVESTMENT PREDICTIONS AND OUTLOOKS
We’ve compiled many of the very best outlooks from various analysts, gurus, hedge funds and investors. We hope you find the list helpful in mapping your successful 2010:


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Deutsche Bank
Changing it up a little is Deutsche Bank as they make their scenario assessment from the big fence that they’re sitting on.

Probability: 15%, Total equity returns: 34% – This is the super bullish scenario. Stimulus continues to impact markets to near perfection. Reflation continues to work and money pours out of low risk assets and into high beta assets. Stimulus continues to pour into the system as the long-term repercussions of stimulus are ignored in favor of short-term gains. Rates stay low as a goldilocks scenario unfolds. Equities outperform and credit spreads continue to tighten.
Probability: 50%, Total equity returns: 20% – This scenario is characterized by a gradual easing in stimulus and easy money policies. As some momentum begins to grow in the first half of 2010 policy makers are comfortable beginning to tighten around the globe. In this scenario risk assets still outperform, but are muted by rising bond yields. Fixed income underperforms.

Probability: 25%, Total equity returns: -11% - Under this scenario bond yields spike sharply higher. The mountain of debt issuance and the end of Quantitative Easing programs fail to bolster the necessary demand. Inflation becomes a growing concern and the potential for sovereign debt problems increase. This is the Julian Robertson higher rates scenario. Equities and bond both perform poorly.

Probability: 10%, Total equity returns: -26% – This is the absolute nightmare scenario where deflation reasserts itself and a double dip becomes evident. The catalyst would be new banking scares, increased government regulation, sovereign debt scare, stimulus withdrawal. A flight to quality ensues and fears of 2008 become all too familiar. Stocks perform very poorly.

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Financial Bloggers Make Their 2010 Projections
The Bespoke Investment Group just posted a killer 2010 Roundtable, including the views of some of the best financial bloggers out there. I was honored to be included along with Eddy Elfenbein, Paul Kedrosky, Bill Luby, Michael Panzner, Mebane Faber, Charles Kirk and all the rest.
-- see detail answers for each of them