'10: No shortage of crystal balls
Ray Allegrezza, Editor in Chief -- Furniture Today, January 11, 2010
For any of you wishing for that proverbial crystal ball to help you plan in 2010, there's good news and bad news.
The good news is that there's certainly no shortage of them. The other day, my friend Steve Rotman of Rotman's Furniture in Worcester, Mass., my trusted source for compelling economic information, sent me a compilation of some of the predictions for 2010. The heavy-hitters offering their outlooks included Blackstone Advisory Group, Goldman Sachs, Deutsche Bank, Credit Suisse, Morgan Stanley and others.
So, where's the bad news in having more than one crystal ball?
There's no consensus.
For example, in keeping with a 25-year tradition of offering his predictions of financial and economic surprises, Blackstone's vice chairman, Byron Wien, sees the U.S economy increasing at a stronger than expected 5% real rate during the year. He's also calling for unemployment to drop below 9%, fueled by exports, a buildup of inventory and spending on technology.
Goldman Sachs is calling for lingering low interest rates and stronger than expected earnings and revenue growth. The company believes that those factors, plus continued margin expansion, will result in 15% or better equity returns this year and will help push the S&P 500 towards the 1300 mark (it was a little under 1140 last week).
Deutsche Bank may have had multiple crystal balls because it offered four different scenarios. The most optimistic is based on a bullish economy that could result in equity returns of about 34%. It sees that outcome as having a 15% probability.
Its most sobering scenario, which could result in a dip in equity returns of -26%, involves things such as an increase in government regulation, more banking scares, stimulus withdrawal and weak performances by stocks. Fortunately, Deutsche Bank sees this outcome only having a 10% probability.
While suggesting that current market conditions and ongoing optimism may push stocks upwards, Morgan Stanley's European strategy team suggests that events including the withdrawal of stimulus could pose a serious risk to growth and could result in a double-digit market decline.
So, what's the takeaway here? While forecasts are helpful, there's no silver bullet or crystal ball.
But no worries: You've got something more reliable. You've got you.
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