2010 Economic Outlook
With 2010 now officially upon us, we turn our attention to what the rest of the year has in store for us. The investment world has been full of surprises over the past 12 months and it will be interesting to see how things unfold over the remainder of the year. One thing can be certain, this will be no ordinary year, and it is our bet that we will see the making of some dramatic economic shifts that will require very careful planning to avoid significant portfolio shocks. Here is the rundown of some of the key areas we will be watching closely.
Interest rate hike:
While there is still a lot of debate (and outright arguing) by the deflation vs inflation camps, it seems that we are seeing more of a swing toward at least one interest rate raise coming during 2010. The overzealous stock market recovery, a likely (though small) improvement in unemployment numbers, commodity appreciation and a very real need for the government to inflate its way out of the enormous debt burden will all be drivers.
For reference, here is a chart that shows the historical Fed Funds rate since the 1950s and how infrequent the periods of ultra low effective rates are. Read more…
