After a disastrous 2008, many investors have looked forward to this year as a potential turning point. Yet as much as you may hope for some relief from the gloomy attitude that has covered the investing world for over a year now, you may find yourself better served by taking a longer-term view -- one that won't necessarily see big results until 2010 and beyond.
According to one group of economists, the U.S. economy has been in recession for over a year. Yet every day, news on the financial front seems to get worse. Huge job losses have pushed unemployment rates higher at a frightening pace. Plunging energy prices have failed to encourage consumers, whose spending has fallen precipitously.
All this bad news may make any potential New Year's rally rather short-lived, as we saw toward the end of last week. Yet regardless of whether the economy starts recovering in the second half of 2009 or ends up taking longer, you can start planning for the next market trends before they occur.
1. Interest rates on the rise
I'll admit: I've been looking for Treasury rates to rise for quite a while now. With the Federal Reserve locked in at a near-zero rate and yields even on longer-term bonds near historic low levels, rates simply can't go much lower than they are now.
But for 2009, all bets are off. Huge amounts of new debt -- estimated at about $1.2 trillion by the Congressional Budget Office -- have thus far been met with extraordinary demand from fearful investors who want to buy Treasuries to preserve capital at any cost. If the economy keeps getting worse this year, then the irrational march toward lower rates may well continue -- rewarding Treasury investors further.
In the long run, though, rates should rise due to a combination of factors:
- Any stabilization in the economy at all will encourage riskier investments, drawing away demand from Treasuries.
- Even if the economy continues to decline, an end to world tolerance of U.S. debt levels could create a flight away from bonds, pushing rates higher.
Right now, banks like Wells Fargo
2. Growth stocks back in vogue
The shrinking economy has taken away investors' appetite for growth stocks. Investors have dumped former highfliers like Google
Once the economy hits bottom, however, investors should remember that following bear markets, what worked badly in the past may suddenly become much more successful. For example, casino stocks like MGM Mirage
3. Emerging markets recover
As big as the bull market was for U.S. stocks, most international markets did even better, especially those of emerging markets like China, India, and Brazil. Yet as the U.S. financial crisis spread throughout the global economy, international investors became less tolerant of relatively new markets and retreated to safer, more established investments.
Despite the Satyam debacle, however, global stocks won't stay down forever. Even if a painful downturn continues through 2009, companies will learn to adapt to new conditions. And in that regard, emerging markets stocks have an advantage: Even though companies like Petrobras
Of course, you'll see many people espousing these themes for 2009 as well. Yet if you're not ready to commit capital to a dicey market and are willing to miss a potential first leg up, then getting ready for these strategies early with the idea of launching them in 2010 may give you exactly the risk profile you want.
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Fool contributor Dan Caplinger still thinks it's worth it to invest for 2009. He doesn't own shares of the companies mentioned in this article. US Bancorp and Petroleo Brasileiro are Motley Fool Income Investor picks. Wal-Mart is a Motley Fool Inside Value recommendation. Sohu.com and Google are Motley Fool Rule Breakers picks. Satyam Computer Services is a former Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy helps you look forward.
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