I hope everyone had a wonderful Christmas this past weekend. Today I'm going to list a few surprises for next year that one of my favorite money managers has compiled. Doug Kass, who is one of the best money managers that I know of, sent out an email this morning where he mentioned the 15 things he expects to happen next year. A lot of the things he talks about are developments and expectations that I've mentioned here several times. Not only does he talk about his 15 surpises, he also includes a few specific strategies that he is going to use in order to capitalize on what he's looking for.
Here are some of the things from the list:
1. The U.S. stock market performs very well (buy U.S. stocks and or mutual funds)
2. The growth in the U.S. economy accelerates as the year progresses (buy Home Depot, Lowes, Ford, Citigroup, Bank of America)
3. Former Presidents Bill Clinton and George Bush form a bipartisan coalition that persuades both parties to unite in addressing our fiscal imbalances. (buy U.S. stocks and or mutual funds)
4. Despite the grand compromise, the Republican presidential ticket gains steam as year progresses, and Romney is elected as the forty-fifth President of the United States.
5. The European debt crisis continues to be a problem, especially in early 2012 but later next year the European Union, working with the specific troubled countries, develop a successful policy to address the issues.
6. The Republican presidential ticket gains steam as year progresses, and Romney is elected as the forty-fifth President of the United States. (buy U.S. stocks and or mutual funds)
7. Sears holding company, especially their Kmart business, files for bankruptcy as their customer base decreases. (buy Walmart and Target)
8. Financial stocks are the leading market sector next year, and perform even better as the year progresses. (buy Citigroup, Suntrust Financial, Bank of America, JP Morgan)
9. Momentum stocks, such as Amazon/Priceline/Google/Baidu, perform poorly. (Don't own them and if you do sell them)
10. As confidence in the U.S. economy grows, mutual fund inflows return in full force. (reallocate your portfolio holdings out of bonds and other conservative investment and into stocks - especially before other people start too!)
11. We'll see merger mania in the banking and insurance sectors. Cheap money, low valuations and rising confidence are the factors that contribute to 2012 becoming one of the biggest years ever for mergers and takeovers. Canadian companies are particularly active in acquiring U.S. assets. Canada's Manulife acquires life insurer Lincoln National, two large banks join a bidding war for E*Trade, and International Flavors & Fragrances and Kellogg are both acquired by non-U.S. entities. Finally, a Canadian bank acquires SunTrust. (buy Etrade, Suntrust, Lincoln National, Kellog, and International Flavors and Fragrances)
12. Israel attacks Iran. The greatest headwind to the worlds equity markets are geopolitical, not economic. Tensions in the Middle East escalate and Iran, who is developing their nuclear program, is attacked by Israel. While the U.S. and Israel are allies, we stay out of the conflict. Iran closes the Strait of Hormuz (which is where oil flows out of the middle east) and the price of oil rises to $125 a barrel
While I don't necessarily agree with some of the surprises I've mentioned above, I do believe several of them will happen. The important thing, at least from my perspective is to analyze what market moving developments have the potential to happen, and therefore position your portfolio to capitalize on them.
