It's nearing the end of the year, so people are making their predictions for the coming year. So, here are mine. Remember that I really don't place much stock in them because there are a ton of factors to consider, but they are fun to make. So, here goes.
1.) The economy does not fall into the Abyss; the recovery continues. Despite the near constant call for the near collapse of the economy, it doesn't fall apart, but instead continues to expand. This will not stop the continual calls for doom which will accelerate and become more prolific.
2.) The pace of growth will be between 3%-3.5% for the year. All current indicators tell us the slowdown created by the EU crisis is over. The recent rise in the leading indicators tells us the pace of expansion is increasing. In addition, manufacturing activity has picked up and retail sales are increasing, all of which point to increased activity.
3.) The jobs market will pick up. Initial unemployment claims have been in a downward trajectory for the last few months. Companies are stretched to the bone and we've now had five quarters of growth, meaning there is enough visibility to make important decisions.
4.) The real estate market will hit its final bottom in the 3-4 quarter of next year. Affordability is very good, there is a ton of inventory and lenders are starting to loosen standards a bit.
5.) Raw materials will increase in price, but this will not lead to a a massive increase in inflation. Producer pries need to fluctuate in massive extremes to have a long-term and pronounced effect on CPI; we simply have not had enough time in that area.
6.) The unemployment rate will drop to between 8.3% and 8.7% by the end of the year.
7.) The interest rate on the 10 year will end within 20 basis points of 5%. the great bull market in bonds is over.
8.) The stock market will increase between 10% and 15% for the year, as measured by the S%P 500.