Wednesday, January 20, 2010

Stockmarket 2010

The Guarded 2010

Singapore's 2010 GDP growth is expected to be 3–5% with IMF placing it at >4%; a turnaround that hopefully can restore jobs, confidence and filter through all sectors of the economy.According to Asian Development Bank, Asia's powerhouse, China's 2010 economic growth forecast is 8.9 per cent, while the International Monetary Fund predicts 9 per cent.

How will the numbers be reflected in the stockmarket or has the market factored in the numbers? Will commodities prices continue to rise and hamper growth with increased costs? What's the winning X-factor?

Crystall-balling the future is as tough as predicting the weather! But, the following factors will lend weight to the possible direction the markets take:


Baltic Dry Index (BDI)

The BDI peaked above 11,600 and bottomed under 1,000 points within months in 2008. In 2009, it traded near 4,600 and tanked to under 2,300 before recovering to above 4,600. Today, its hovering around 3,100 points (http://investmenttools.com/futures/bdi_baltic_dry_index.htm#bdi) This is good indication that the runaway rise in commodities prices has abated. The wild gyration in the stockmarket will likely be moderated too.But, commodities prices will still rise.


Liquidity

With less reliable investible instruments around, there is a tendency to look for good-old-faithful avenues to place funds; stockmarkets seem to be the right avenue! Its just where and which one?


Momentum Trading (MT)

With massive liquidity around, amidst uncertainty (watch Yen carry trade & US$ carry trade), Momentum Trading will lead markets either way. Trade with care and do your own homework.


Qualitative Approach

It is imperative that a complete comprehension of a/the chosen market, with "helicopter view" of country, industry, management and markets is necessary to 'win' in an uncertain environment. A clear lesson was those who were ready and bought, or did not panic, around Mar/Apr 2009. Everyone wants to make money but few want to do homework.

Silver and gold may be better alternatives when faith in paper money is challenged.


Stimulus Packages

The recovery is sustained by stimulus packages and plentiful of (paper) money. Any premature withdrawal will decimate recovery and reboot system to early 2008!


Others

The loss of confidence in papermoney, namely US$, the widening of rich/poor gap, natural calamities and diseases will lead to social unrest. A rise in interest rate will also dent recovery

My guess (of stockmarket 2010) is :

Jan - Apr - market continues to ride the momentum flow with topping-up possibility (observe -
2010 Jan 15 : Annular Solar Eclipse) 

Apr - Jul - as market players expect better corporate performances, anything less 'than a good' coupled with talk of withdrawal of stimulus packages will be taken negatively resulting in corrective phase (observe - 2010 Jun 26 : Partial Lunar Eclipse)

Jul - Oct - fresh and additional injection of stimulus packages and concerted political co-operation globally will restore confidence in markets (observe - 2010 Jul 11 : Total Solar Eclipse)

Oct - Jan - reality checks (observe - 2010 Dec 21 : Total Lunar Eclipse)

2010 is as cloudy as 2009. Sooner or later, Governments have to find alternative sources of income/taxes to fund stimulus packages and jobs creation. 2010 should be a growth year for 'protected' industries as well as necessities.

Good luck. 

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Best regards & God bless


(THIS IS NOT AN INVESTMENT ADVICE & CANNOT BE RELIED UPON FOR INVESTMENT DECISION. IT'S FOR READING PLEASURE ONLY.)

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