1. The financials, with Bank of America leading the way, will be the best preforming sector on the NYSE in 2011.
8. House Republicans play politics and refuse to make any hard decisions preparing to take on Obama in 2012.
9. The European sovereign debt crisis continues to boil under the surface.
- A significant run up in the S&P 500 (1,243 currently) to 1,390 occurs as bond holders sell due to inflation fears and insufficient yields in the fixed income arena.
- Interest rates begin to rise as the debt market demands higher yields. Higher interest rates choke off the anemic recovery.
- The Federal Reserve announces QE 3 in late summer as the optimism sparked by the stock market’s run up fades.
- Summer 2011 brings increased volatility back to the market.
- Market sells off in late September and early October 2011.
- If the move up in the financials is confirmed by increased revenue within the transportation sector. This would mean I am way off base!
- The US Treasury curve starts to flatten.
- The price of gold collapses.
- Interest rates start to decrease at the beginning of the year.
- The Chinese government quits trying to curb inflation.
- The US dollar strengthens significantly.
- Inflation fears subside in the first and second quarters.
- The price of oil decreases in the first half of the year.
- The Iranians allow complete inspections of their nuclear facilities.
- Buy gold on the dips
- Buy US financial institutions too big to fail (Bank of America, JP Morgan, Wells Fargo, Morgan Stanley Smith Barney, AIG)
- Short high yield muni bonds
- Lighten fixed income portfolio now, hold the cash, when the yield on the 10 year US Treasury goes under 3.1% mid year, start dollar cost averaging on the long end of the curve
- Dollar cost average into high dividend paying large US cap stocks. On brisk moves up in the market buy put leap options 15% out of the money (they should be cheap during the first half of the year)
- Increase emerging market exposure, Brazil, Argentina and Australia
- Remember to always hedge, even I am wrong now and then!