Everyone's got a market prediction. But some have better records than others.
(Photo: Paul Bradbury/Getty)
The forecasting of economies and financial markets is a notoriously imprecise art. But like any other profession, the individuals in this line of work vary in their abilities, and some of the best do have rather impressive batting averages. Here are highlights from the 2012 outlooks issued by some of the brighter minds in the field.
Global economy
“The big picture is that the world is plagued by hugely excessive debt, much of it bad, and policymakers will eventually be forced to choose between an excruciating 1930’s style debt deflation or massive bailouts. Sooner or later, they will choose the latter.” —The Boeckh Investment Letter
“We believe that any attempt to inflate away the massive western debt levels would create a panic in debt markets and financial disarray. Further, if new significant sources of productivity growth do not exist, then deflation represents an ongoing threat. ” —CIBC World Markets strategists Peter Gibson and Jeff Evans
Eurozone
“If the euro does break up, the toll on jobs, economic activity, freedom of movement, and social cohesion would be huge. And that’s why it probably won’t fail.” —Breakingviews.com
“Our base case forecast is that the macroeconomic cost of keeping the Euro-zone going will be a recession across most of Europe through at least the first half of 2012 and a prolonged period of subdued growth after that ….” —Northern Trust Global Economic Research
U.S.
“The economy isn’t in imminent danger of relapsing into recession [according to the Federal Reserve, most private economists and Wall Street strategists] … but the Economic Cycle Research Institute, an organization with an excellent track record, says the U. S. is actually heading into another recession.” —New York Times Strategy columnist, Jeff Sommer
Canada
“We believe that a globally coordinated easing starting in Europe, followed by the U.S. and China can postpone a global recession and the Chinese real estate crisis. In this case, oil prices would rise above US$100/bbl again and the C$ would be above parity by the end of 2012 with the TSX energy, materials, and industrial sectors moving higher. … ” —CIBC World Markets strategists Peter Gibson and Jeff Evans
Emerging Markets
“The turbocharged ride of the past decade has left them over-owned and bubbly, while their competitive advantage has been eroded by inflation and currency appreciation.” —Arcus Research analyst Peter Tasker (writing in the Financial Times of London)
China
“[There is a] gathering sense that the next act of this rolling global debt crisis may well play out in the East.” —Emerging Sovereign Group
Japan
“Spurred in large part by rebuilding efforts [following the devastating earthquake and tsunami], Japanese GDP should expand by 2.2% next year. … [But] Japanese exporters …face weakening demand from the impact of the Euro-zone crisis, concerns about the economic health of China [and] the persistent strength of the yen … as investors seek a safe haven.” —Northern Trust Global Economic Research
Stocks
“Sustained low stock prices might make it another classic year to accumulate stocks. It does not follow, however, that markets will rise.” —Breakingviews.com
“Valuations are at extremely attractive levels considering bond yields and low inflation expectations. The gap between the earnings yield on the S&P and Baa corporate bonds is over two standard deviations in favour of stocks. While no single indicator is worth betting the farm, this particular one has provided excellent signals for stock market bottoms in 1988, 1996, 2003, 2009 and 2010. … Eventually, investors faced with cheap stocks, ample liquidity and few good alternatives, will buy equities.” —The Boeckh Investment Letter
“If we assume extremely pessimistic nominal earnings growth of 3% over the coming decade and a compression in the price-earnings ratio to 10, equities would still deliver returns above current bond yields. We therefore expect to move back to overweight equities sometime this year.” —BCA Research
“Monetary policy in the U.S. and U.K. is much more proactive than in the euro zone and Japan …. Not surprisingly, U.S. and U.K. stocks have been outperforming this year. In addition, the dollar and sterling are cheap, while the euro and yen are expensive. Our Global Investment Strategy service does not expect these basic conditions to change. … [We] continue to prefer U.S. and U.K. equities over euro area and Japanese counterparts.” —BCA Research
Blogs & Comment
Best of the 2012 market forecasts
Everyone's got a market prediction. But some have better records than others.
By Larry MacDonald
(Photo: Paul Bradbury/Getty)
The forecasting of economies and financial markets is a notoriously imprecise art. But like any other profession, the individuals in this line of work vary in their abilities, and some of the best do have rather impressive batting averages. Here are highlights from the 2012 outlooks issued by some of the brighter minds in the field.
Global economy
“The big picture is that the world is plagued by hugely excessive debt, much of it bad, and policymakers will eventually be forced to choose between an excruciating 1930’s style debt deflation or massive bailouts. Sooner or later, they will choose the latter.” —The Boeckh Investment Letter
“We believe that any attempt to inflate away the massive western debt levels would create a panic in debt markets and financial disarray. Further, if new significant sources of productivity growth do not exist, then deflation represents an ongoing threat. ” —CIBC World Markets strategists Peter Gibson and Jeff Evans
Eurozone
“If the euro does break up, the toll on jobs, economic activity, freedom of movement, and social cohesion would be huge. And that’s why it probably won’t fail.” —Breakingviews.com
“Our base case forecast is that the macroeconomic cost of keeping the Euro-zone going will be a recession across most of Europe through at least the first half of 2012 and a prolonged period of subdued growth after that ….” —Northern Trust Global Economic Research
U.S.
“The economy isn’t in imminent danger of relapsing into recession [according to the Federal Reserve, most private economists and Wall Street strategists] … but the Economic Cycle Research Institute, an organization with an excellent track record, says the U. S. is actually heading into another recession.” —New York Times Strategy columnist, Jeff Sommer
Canada
“We believe that a globally coordinated easing starting in Europe, followed by the U.S. and China can postpone a global recession and the Chinese real estate crisis. In this case, oil prices would rise above US$100/bbl again and the C$ would be above parity by the end of 2012 with the TSX energy, materials, and industrial sectors moving higher. … ” —CIBC World Markets strategists Peter Gibson and Jeff Evans
Emerging Markets
“The turbocharged ride of the past decade has left them over-owned and bubbly, while their competitive advantage has been eroded by inflation and currency appreciation.” —Arcus Research analyst Peter Tasker (writing in the Financial Times of London)
China
“[There is a] gathering sense that the next act of this rolling global debt crisis may well play out in the East.” —Emerging Sovereign Group
Japan
“Spurred in large part by rebuilding efforts [following the devastating earthquake and tsunami], Japanese GDP should expand by 2.2% next year. … [But] Japanese exporters …face weakening demand from the impact of the Euro-zone crisis, concerns about the economic health of China [and] the persistent strength of the yen … as investors seek a safe haven.” —Northern Trust Global Economic Research
Stocks
“Sustained low stock prices might make it another classic year to accumulate stocks. It does not follow, however, that markets will rise.” —Breakingviews.com
“Valuations are at extremely attractive levels considering bond yields and low inflation expectations. The gap between the earnings yield on the S&P and Baa corporate bonds is over two standard deviations in favour of stocks. While no single indicator is worth betting the farm, this particular one has provided excellent signals for stock market bottoms in 1988, 1996, 2003, 2009 and 2010. … Eventually, investors faced with cheap stocks, ample liquidity and few good alternatives, will buy equities.” —The Boeckh Investment Letter
“If we assume extremely pessimistic nominal earnings growth of 3% over the coming decade and a compression in the price-earnings ratio to 10, equities would still deliver returns above current bond yields. We therefore expect to move back to overweight equities sometime this year.” —BCA Research
“Monetary policy in the U.S. and U.K. is much more proactive than in the euro zone and Japan …. Not surprisingly, U.S. and U.K. stocks have been outperforming this year. In addition, the dollar and sterling are cheap, while the euro and yen are expensive. Our Global Investment Strategy service does not expect these basic conditions to change. … [We] continue to prefer U.S. and U.K. equities over euro area and Japanese counterparts.” —BCA Research