As you continually assess current events for any impact on your
portfolio, you also need to spend time thinking about what events
may be on the horizon. And although none of us has a crystal ball,
it's important to try to anticipate the direction ofeconomics ,
sector activity, politics and any other issues that may affect the
The list below contains possible scenarios for the next 12 months
that could impact your portfolio in a meaningful way.
New jobless claims fall below 400,000 in the first quarter, and
meaningful job creation begins in earnest in 2011 as companies
realize that they've squeezed out all possibleproductivity
enhancements and need to re-build depleted workforces. The
is slow to fall, as previously discouraged workers start to look
for work again. But investors focus on the monthly jobs creation
number instead of the actual unemployment rate.
Noting the impressive synergies that
derived from its
with Northwest (which were only belatedly appreciated by
investors), investors continue to bid upshares of
after its merger with Continental. Investors take note of the
fairly low price-to-earnings (
) ratios in the sector, even as it has rebounded sharply in the
past 12 months. P/E ratios move 30% higher in the next year, as
investor concerns about any new economic weakness start to abate.
Airlines are able to raise prices at a reasonably aggressive pace,
though some of those gains are blunted by rising jet fuel
Venture capitalists start to get anxious. With pensions and
endowments looking to pull some money out of
funds, theventure capitalist firms seek ways to monetize their
holdings. As the
market remains challenging (many recent IPOs are non-venture-backed
China plays), they seek out large public tech companies to buy out
their stakes at large discounts to recent financing rounds. This
extends the tech M&A frenzy, and these deals help set the stage
for further gains in tech stocks in 2011.
Britain's financial austerity plans are watered down a bit by
Parliament, but still lead to an unexpected shock in the
U.K.economy in 2011 as unemployment rises, labor strikes ensue, and
the pound starts to lose its safe-haven status. Major British
corporate and realestate assets go up for sale, and newly-injected
foreign capital sets the stage for a nice rebound -- but not for
several years. The weaker British pound also triggers a surge in
tourism, one of the country's few bright spots in 2011.
States finally stop bleeding, as heavy cost cuts take effect and
revenue finally starts to rise at a modest pace. Several states
with high debt-levels reach a crisis point in 2011 as federal
stimulus support winds down, but most states start to move back
toward a balanced budget. Smaller state governments create a local
drag on employment in places like Albany, NY, Madison, WI and
[Continue reading "
10 Bold Predicions for 2011: Part 2
-- David Sterman
David Sterman started his career in equity research at Smith
Barney, culminating in a position as Senior Analyst covering
European banks. David has also served as Director of Research at
Individual Investor and a Managing Editor at TheStreet.com. Read
Disclosure: Neither David Sterman nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.
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