Oliver Pursche 2012 Market Predictions: Market Rises, Greece Exits & Commodity Bull Run Resumes
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Rating Summary:
28 Buy, 19 Hold, 1 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 12 | New: 50
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2012 Market Predictions by Oliver Pursche
Pursche said, "Live by the sword, die by the sword. The fact is everyone in the financial services or wealth management business has thoughts–secret or otherwise–about what they feel the markets will do next year. Question is, are they brave enough to go on the record about it? I am. And I’ll go one better. This time next year I’ll revisit these predictions and either pillory myself, or emboldened, make 10 more."
Prediction 1: The S&P 500 Index will rise by at least 10%: This may not be as brave as it seems. For this one I’ve got history on my side...If you have a lot of conviction this prediction will come true, you might consider buying the Russell 1000 High Beta ETF (HBTA). If you think the election will work its magic, but that the patient still has a bad case of anemia, you might consider buying the Russell 1000 Low Volatility ETF (LVOL).
Prediction 2: Greece will begin official negotiations to exit the euro: Nobody wants to see this because the implications are severe. If Greece drops the euro in a dramatic fashion, we will see a huge flight of capital out of Spain, Italy and Portugal, into the northern countries such as Germany, Holland and Denmark.
Prediction 3: President Obama wins reelection: In spite of a weak economy and continued high unemployment the republican party’s own lack of leadership and cohesiveness will weaken them to the point where Obama looks like the better option. Moreover, the party’s willingness to pander to the right wing will make them unpopular with middle class and middle of the road voters. As a result, I would expect the election to be marked by record low turnout frustration, apathy and disgust, but at the end of the day, Obama will have won four more years in office.
Prediction 4: China will allow the Renminbi (Yuan) to rise nearly 8% against the dollar: Slowly and rather quietly, China has already begun to loosen monetary policy. For instance, at the end of November, it lowered the reserve requirement for six banks. Unlike here in the U.S. where monetary policy is carried out through a series of complex market transactions, China’s government simply told these banks what to do. China will continue to lower rates in the first half of the year to spur on growth. Europe accounts for roughly 25% of China’s exports, and lower demand from Europe will be material for China.
(The way for investors to play this is to own consumer staples multinationals. We own McDonald’s (NYSE: MCD),Caterpillar (NYSE: CAT), Yum Brands (NYSE: YUM) and Procter & Gamble (NYSE: PG). Though we do not own it, the Consumer Staples Select Sector SPDR Fund (XLP), is another way to play growth in China)
Prediction 5: The commodity bull run resumes in 2012: One reason commodities cooled off in the latter half of 2011 was because of concerns about a global slowdown or worse, recession. I don’t believe this will happen, and in fact we forecast that global GDP should be around 3% in 2012. China, thought by many to be headed for a crash landing, will have a soft landing instead. Europe will have a recession, but it will be mild and here in the U.S., we will avert a recession, and instead deliver sub par GDP growth of 2%. As a result, global demand for agricultural and base metal commodities will remain in tact, and in some pockets will be superlative. The avoidance of a global recession or slowdown will act as a catalyst for commodities related companies.
(Investors can play this by investing in global agricultural stocks. We are long Monsanto (NYSE: MON), but Deere (NYSE: DE), Caterpillar (NYSE: CAT), and the PowerShares DB Agriculture Fund (DBA), none of which we own, are also viable candidates. To play the metals side of a surge in commodities, investors can look at PowerShares DB Base Metals Fund (DBB))
Pursche said, "Live by the sword, die by the sword. The fact is everyone in the financial services or wealth management business has thoughts–secret or otherwise–about what they feel the markets will do next year. Question is, are they brave enough to go on the record about it? I am. And I’ll go one better. This time next year I’ll revisit these predictions and either pillory myself, or emboldened, make 10 more."
Prediction 1: The S&P 500 Index will rise by at least 10%: This may not be as brave as it seems. For this one I’ve got history on my side...If you have a lot of conviction this prediction will come true, you might consider buying the Russell 1000 High Beta ETF (HBTA). If you think the election will work its magic, but that the patient still has a bad case of anemia, you might consider buying the Russell 1000 Low Volatility ETF (LVOL).
Prediction 2: Greece will begin official negotiations to exit the euro: Nobody wants to see this because the implications are severe. If Greece drops the euro in a dramatic fashion, we will see a huge flight of capital out of Spain, Italy and Portugal, into the northern countries such as Germany, Holland and Denmark.
Prediction 3: President Obama wins reelection: In spite of a weak economy and continued high unemployment the republican party’s own lack of leadership and cohesiveness will weaken them to the point where Obama looks like the better option. Moreover, the party’s willingness to pander to the right wing will make them unpopular with middle class and middle of the road voters. As a result, I would expect the election to be marked by record low turnout frustration, apathy and disgust, but at the end of the day, Obama will have won four more years in office.
Prediction 4: China will allow the Renminbi (Yuan) to rise nearly 8% against the dollar: Slowly and rather quietly, China has already begun to loosen monetary policy. For instance, at the end of November, it lowered the reserve requirement for six banks. Unlike here in the U.S. where monetary policy is carried out through a series of complex market transactions, China’s government simply told these banks what to do. China will continue to lower rates in the first half of the year to spur on growth. Europe accounts for roughly 25% of China’s exports, and lower demand from Europe will be material for China.
(The way for investors to play this is to own consumer staples multinationals. We own McDonald’s (NYSE: MCD),Caterpillar (NYSE: CAT), Yum Brands (NYSE: YUM) and Procter & Gamble (NYSE: PG). Though we do not own it, the Consumer Staples Select Sector SPDR Fund (XLP), is another way to play growth in China)
Prediction 5: The commodity bull run resumes in 2012: One reason commodities cooled off in the latter half of 2011 was because of concerns about a global slowdown or worse, recession. I don’t believe this will happen, and in fact we forecast that global GDP should be around 3% in 2012. China, thought by many to be headed for a crash landing, will have a soft landing instead. Europe will have a recession, but it will be mild and here in the U.S., we will avert a recession, and instead deliver sub par GDP growth of 2%. As a result, global demand for agricultural and base metal commodities will remain in tact, and in some pockets will be superlative. The avoidance of a global recession or slowdown will act as a catalyst for commodities related companies.
(Investors can play this by investing in global agricultural stocks. We are long Monsanto (NYSE: MON), but Deere (NYSE: DE), Caterpillar (NYSE: CAT), and the PowerShares DB Agriculture Fund (DBA), none of which we own, are also viable candidates. To play the metals side of a surge in commodities, investors can look at PowerShares DB Base Metals Fund (DBB))
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