Like you, we are in wind-down mode at the moment. Last Friday we thought of a great idea. Send out an email to some of our contacts in the market to see what views they had on the market for next year.
Anticipating a flood of responses we figured we could get away with copying and pasting their answers while we put the feet up and relax.
Alas, the flood wasn’t even a trickle. As much as we tried to encourage responses by clicking on the “Send/Receive” button on the email, all we got was the sound of crickets chirping.
Fortunately, by late on Friday we did get a tiny trickle. A couple of our contacts have offered to write a brief article for us, so we’ll publish those in early/mid January.
The only one brave (or foolhardy) enough to serve up a prediction was our old pal Robert Mulcahy, Senior FX Dealer at CMC Markets.
Rob’s at the frontline dealing with currency traders every day, so that gives him a good handle on what the FX punters are thinking and doing right now. Here’s what he had to say about the outlook for currencies next year:
“Despite a year that has seen amazing swings and record volatility I am expecting 2009 will see a resurgence in the fortunes of the US Dollar. As Central Bank rates head to zero across the globe speculators will be looking for a safe haven and as the current account deficit narrows it provides an indication of steady currency inflow.”
“Despite the US economy facing its own problems in 2009 I believe that the Eurozone underestimated the effects of the financial crisis and were slower in acting and thus will pay the price.”
“Look for EURUSD to be around 1.25 by mid 2009.”
As you may have worked out, that pretty much takes the opposite view to what we are expecting for 2009. But that doesn’t mean to say we will get it right.
But he is spot on about the European markets having underestimated the effects of the financial meltdown.
Smiles were soon wiped from faces when the Europeans worked out that they were not only invested in US mortgage rubbish, but they also had a credit, property and stock market bubble of their own to deal with.
But making predictions is a dangerous game. As can be seen from the performance of the predictions made by so-called market heavyweights last year.
Today’s Australian Financial Review (AFR) gives us the rundown on how they performed. All of them were predicting a relatively flat market for 2008. Obviously they thought the steam would come out of the market but that it would consolidate at the high level.
Oops! Now they are being much more bullish for 2009. Or are they being more bearish? Well, based on the AFR article it looks as though they are hedging their bets. Based on the numbers they are predicting an average rise of 27.2% for the year. That would take the S&P/ASX200 up to 4600 points. That’s 1000 points above Friday’s close.
But if you read the words they are more cautious suggesting the market may not have seen the worst of things.
Whatever they predict, you can bet they are only concerned with mainstream thoughts. To a man, we would guess that they have been in favour of the slashing of interest rates and that they also believe the inflation threat to be over.
We also wouldn’t be surprised to see the market rise next year. But for different reasons. Our guess is that the meddling from government will have a very short term “positive” impact on share prices.
However, long term, governments are just putting off the inevitable consequences of the years of excess.
Cheers.
Kris.