As we approach the end of the year, let’s take stock. It has been a tough year for many people, a global recession, many job layoffs, uncertainty in markets, have no doubt also caused a certain amount of anguish in many people.
Although stock markets looked as if they were on the edge of an abyss in March, the darkest time was followed by a huge rebound in the months that followed. I remember writing at the start of the year in my GM column in the Fundsupermart magazine that this year (2009) will surprise many an investor as it would turn out to be a positive one. Markets did in the end surprise on the upside, with many markets moving up 50% or more.
Despite the positive performance by markets this year, I suspect many investors remain in the red in terms of their investments which were bought at higher prices. The economic turmoil has wrecked havoc on many company’s earnings and in turn bonuses, increments, has been cut, amidst much job uncertainty. Many would heave a sigh of relief to put the year 2009 behind them.
But enough of looking back, it is more important to look forward. 2010 will usher in a new year. A new year, with new resolutions, worries, as well as new hopes. While challenges and concerns remain plenty, the economic environment is definitely on the mend. US, still a key export market, is clearly coming out of recession, its housing market showing signs of improvement. China is continuing its high rate of growth, and many Asian economies have also all swung out of recession.
Along with the recovery in the various Asian economies, companies are likely to see their earnings improve in 2010. 2009 saw earnings of many companies plunge as demand plummeted and fear made everyone cut back drastically. 2010 will see much needed confidence return to consumers, helping to drive earnings of many companies back up again. While we are still along way off from the highs of 2007, it would still be a significant improvement from the lows of 2009.
There are many concerns aplenty amidst this tide of growing positive news. But this is precisely why I am confident that there is still lots more upside to stock markets. Trading volume remains weak at this point, and there are huge amounts of money remaining in cash. From Greece going under scrutiny, to Dubai World’s troubles, from worry over hyper inflation, to worry about double dip recessions. All these concerns means that investors will not so quickly forget about fear, that greed will not set in so quickly. This means that markets will trend up steadily based on fundamentals rather than rocket up, carried by greed and over exuberance.
2010 will be a good year for investors, in particular those who are patient. I look forward to the new year in great anticipation, but tempered with prudence. We won’t see the kind of eye popping returns of 2009, and there will be volatility mixed in with times when the markets seem dead and stagnant. But ultimately, by the end of 2010, I expect that investors who persisted throughout the whole year will see decent returns. I expect Asian markets could return 20 to 30% for 2010.
So, after rebalancing your portfolios at the end of the year, look forward into the new one and take heart. 2010 will be a good year. Here’s wishing everyone a Merry Christmas and a Happy New Year!
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