Jon Markman lays out 11 predictions for 2009:
No. 1: Infrastructure spending plans will bog down in Congress: In short, passage of this noble yet spendthrift job-creation bill will drag out, blunting its effectiveness.
No. 2: The unemployment rate will approach 10%.
No. 3: Weak second-quarter earnings will dash hopes.
No. 4: Synchronized swoon will become an Olympic event: Past recessions have ended once one region’s strength pulled up others, but Europe, Asia, the United States and Latin America will continue to pull each other down as monetary and fiscal stimuli fail to significantly erode debt loads.
The longer the recession, the more likely earnings will drop more than managements can handle, leading to accelerating bankruptcies and unemployment. Big companies will see earnings-per-share drops of 25%-plus.
No. 5: Markets will reach lower lows: In 2009, final lows will come at 550 to 700 as the absolute level of earnings estimates plunges amid despair over the lack of progress from federal stimulus efforts.
No. 6: Chinese growth will slow to the 0%-to-4% range — or worse.
No. 7: Russian, Persian Gulf and Japanese investors won’t bail out the U.S:
The decline in oil and gas prices will gut the Russian and Persian Gulf economies to the extent that their governments will be too focused on boosting domestic growth to bother with buying more U.S. and European assets.
Due to their higher savings rate, the Japanese might actually regain some of their pre-1990 stature and use their strengthening yen to make smart acquisitions even as their domestic economy falls back into its two-decade recession.
No. 8: Treasurys will trump corporate debt.
No. 9: Market timing will beat buy-and-hold.
No. 10: Investors will seek low-risk growth.
No. 11: Russia will seek its own bailout.