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Economic Outlook 2010 - Stocks |
The stock market has benefited greatly from a
depreciating dollar especially exporters.
Unfortunately, the weak dollar is not a
panacea for all of our troubles.
Although the economy has shown some signs
of basing, key areas such as new orders for
durable goods and consumer credit are still
declining. Historically this has been associated
with negative returns for stocks.
Washington’s meddling in economic and
financial affairs, while well intentioned, will
ultimately prove troublesome for stocks.
Likewise, the markets have typically reacted
poorly in the year before tax increases.
Our indicators suggest smaller capitalization
securities should perform admirably during
rallies. The weaker dollar may also benefit
certain basic material stocks, especially those
involved with precious metals. Select
technology issues may also perform relatively
better as this sector often leverages export
opportunities.
Look for extreme volatility and poor performance
for lower quality stocks.
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| Positives |
Negatives |
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Weak dollar |
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Important business factors still negative |
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Huge increase in money supply |
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Consumer credit declining |
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Rise in gold |
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Rising taxes and regulations |
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Expensive valuations, sector leadership lacking |
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