Sunday, January 18, 2009

Focus on the Future (Not on the Past)

"It's tough to make predictions, especially about the future." ~ Yogi Berra

The key to investing success for 2009 is not knowing what happened in 2008. It's being right about what will happen in 2009. A lot of new factors could change the expected outcome in 2009. For me, these include:

  • New President. Barack Obama has been surprising centrist based on his Cabinet selections and comments leading up to his inauguration on Tuesday. In fact, many of his economic positions, since being elected, don't seem that different from where McCain and Bush have been.

  • Democrat majority in Congress. The Democatic leadership is very liberal, and seems to working towards excluding the Republican minority. Harry Reid and Nancy Pelosi will be working hard to deliver their liberal agendas.

  • More government intervention. As more financial institutions fail, the level of government involvement will increase significantly. I would not be surprised if the Bank of America and Citibank are government entities by the end of 2009.

    In addition, the government will be pumping money into the economy and significantly increasing spending. I expect that this action will lead to higher inflation in the longer term.

  • Very low interest rates. I expect the Fed to keep interest rates low throughout 2009. This will bring 30 year fixed mortgage rates below 4%, but also keep fixed income investment yields low.

  • Economic bottom will occur. 2009 will continue to be a tough year for business, with many more failing. However, the companies that survive will emerge stronger, leading to a robust economic recovery.
  • OK, I don't really know if any of these predictions will happen. However, I sure am hoping mortgage rates to drop below 4%, since it would reduce our mortgage payments up to 37% ;-)

    For more on New Beginnings, check back every Sunday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    1 comment:

    Manshu said...

    I hope these banks do not get nationalised, but, I do agree with you quite a bit.

    Already I am hoping for 2010 for a better year (can't imagine how recovery can happen in 2009)