Revisiting My 2012 Fearless Forecasts

Posted by on Aug 7, 2012 in Economy, Politics, Stock Market | 6 comments

These were the predictions that I made in the January 19 edition of my monthly newsletter, “News and Views”. All in all, they aren’t too bad after seven months. And you’ll notice that I predicted the Giants would beat the Patriots in the Super Bowl. Got that one dead right.

  1. I think the broad markets will be up in 2012. Put me down for a 10% gain for the Dow Jones Industrial Average, which will finish the year around 13,440. As usual, it won’t be a straight line to get there; there will likely be three or four corrections of at least 5% and up to as much as 15%. But investors who hold tight will be rewarded.
  2. Clearly the Fed will leave short term rates unchanged for the entire year; they’ve already declared as much. I also believe that there will be no new “quantitative easing” plans as the economy improves organically. I think the yield on the 10-year Treasury will stay in a range of 1.75% – 2.50% and the 30-year bond will hold at roughly 1.00% higher than the 10-year. Short rates will likely continue to hover around zero.
  3. Forecasting the direction of the dollar is tough because as bad as things here have been, economies around the world are much worse. So much depends on what happens in the ECU and what happens domestically as our elected officials debate tax policy. Therefore I’m going to forecast, like last year, that the dollar index will trade in a relatively narrow range for most of the year at 75-85.  
  4. The price of West Texas Crude is no longer simply a factor of supply and demand. It also trades on the health of the global economy, sentiment and the relative value of the dollar. That being said, I think the price of WTIC will stay for much of the year between $90 – $110, with outer boundaries of $80 and $120, unless there is a strike on Iran, at which time oil prices could briefly spike to $150.  
  5. The price of gold has moved higher in each of the last 11 years and I’m confident it will do so again this year. My upside target is about $2,000 per ounce while the downside is about $1,450. The primary trading range will probably be something like $1,600 – $1,850. I think the price of silver could test $50 per ounce again while it’s downside is probably around $26.  
  6. The housing market will continue to suffer in 2012. Average prices will remain depressed thanks to foreclosures and short sales. Even historically low rates won’t move this market as only consumes with pristine credit looking to buy conforming homes will be offered mortgages. The jumbo market remains effectively closed.  
  7. I think the average rate of GDP growth over the next four quarters will be around 2.5%, which is better than 2011.  
  8. Jobs will continue to be one the most important domestic stories of the year. The unemployment rate will likely top out around 8.7% to 10.2% before falling, at best, to around 9% by the end of the year. 9.5% might be the best we get. The U-6 measure for unemployment, a more accurate gauge of the true unemployment situation, will likely remain in the 16%-17% range.  
  9. I believe President Obama will defeat Mitt Romney in a relatively close election as a divided GOP is unable to coalesce behind Romney. The Tea Party is marginalized and the Senate remains in Republican control. Fiscal austerity, job creation and tax policy are the main debate points. The electorate forces Obama away from class warfare and back to the middle (ok, that’s my wishful thinking).  
  10. There will be a military strike on Iran by some nation. There will be more unrest in Russia as the population rises against Putin. There will be more violent weather this year, continuing the carnage from 2011. Europe will continue to push their fiscal problems into the future, offering palliative band aid solutions rather than applying the tourniquet. And the Giants will surprise everyone and beat the Patriots again in the Super Bowl (ok, more wishful thinking).

6 Responses to “Revisiting My 2012 Fearless Forecasts”

  1. So Greg, which is easier, forecasting the weather or the superbowl? Interesting take on precious metals. Good job on the newsletter.

    • Clearly forecasting the super bowl is easier. And trying to get a handle on the precious metals market is harder still. But the latter is more lucrative if done properly. Thanks for the comment.

      • Pretty good job on the Economy and investment areas… Well done on the Superbowl… But I can’t agree with you on the Political side… I think the Republicans will pull it together, if they concentrate on the Economy the American voters will follow…. How many of us are better off than we were in 2008?

        • It’s ok that we don’t agree on politics. There are parts of both the Democrat and the Republican agendas that I agree with and parts that I disagree with. The “are we better off” question I’m afraid is too simplistic. So much of what went on in the prior eight years spilled over in the the recent four years. Many of the issues, like taxation, employment, housing, etc. take years or decades to resolve. But it will make for an interesting debate this fall.

  2. Yes, the unemployment number scares the hell out of Wall St. Even more scared is Main St. and Main St. retail. With the actual jobless rate around 15%, it’ll be interesting to see how local governments work to get more people back to work.
    Oil and gold will always continue to climb.
    The big issue for 2013 will be “where is the yield ?”
    Obama beats Romney by the slimmest of margins. Much to the chagrin of everyone I know.

    • Lou, thanks for the comments. I believe employment, or the lack thereof, will be the biggest issue of the upcoming election. And unfortunately, it really isn’t up the the government, whether on the federal, state or local level, to put people back to work. That job falls to business. The best thing the government could do would be to get out of the way of business and create an environment whereby business has an incentive to hire more people. The last thing we want, or need, is even more government intervention. I agree that the price of gold will move higher. Oil is trickier because so many factors go into the pricing. The Federal Reserve has determined that yields will remain low through 2014 and likely beyond. And I agree, Obama probably wins an extremely close election but the Republicans retain the majority in Congress.

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