Thursday, December 31, 2009

SilverOz Economic Predictions for 2010

I decided to go out on a limb and place my economic predictions for the last year of the first decade of the 21st century for all to see and ridicule later in the year (and probably now too). I am not very optimistic about our prospects for a robust economic recovery next year, but at this time do not see a double-dip recession either. Since these are predictions, this post is graph free.

1. The US economy stagnates after a robust Q1 (3%+ growth). I see full year GDP coming in around 1.5%.
2. That low GDP also means a lack of job creation. While I do think we will get our first initial positive print for jobs in a week (and November will be revised to a gain), I do not see the gains being large enough over the course of the year to make a significant impact on the unemployment rate. I see U-3 at 9.1% at years end.
3. Interest rates are an interesting topic right now, as the Fed is getting our of quantitative easing and we are floating a ton of debt to a world that may not be able to continue to afford it with our decline in consumer spending. I think interest rates are going to play a large part in the slowing of GDP as the year goes on, as I see the 10-year hitting 5% in 2010 (and on their way up).
4. Inflation has many people scared with the Fed's easy money policies, but I just don't see it at this point outside of a potential re-spike in commodities. I think we end 2010 with year over year inflation at 3.2% (that is CPI, not core).
5. In 2010, I think the housing market will finally stabilize (albeit at a lower level) and see price gains for the year of .1%.
6. Finally, the dollar. After rallying in Q1 on GDP growth, I think our debt and stagnation will cause the dollar to fall again, ending the year at $1.58/Euro.

Those are my economic predictions for 2010. Now to do something I am loathe to do, a few more predictions:

The S&P 500 will end the year at 1190 (with a range of 1020-1230). Republicans will make major gains in both the House and Senate, but will not take either house (53D, 45R, 2I in the Senate and 224D-211R in the House). And for all you gold bugs out there, I think gold ends 2010 at $1050/ounce.