For the folks with worry beads.
Thursday, January 6th, 2011Assuming the U.S. is still lead steer, there are 10 things to watch out for in 2011 says John Nyaradi.*
- Analysts almost uniformly expect 2011 to be a bullish year for U.S. equities due to the Fed’s continuing program of quantitative easing and improving economic conditions at home. Watch for continued bullish sentiment which alone should be a wildly bearish indicator as the herd is almost always wrong.
- The situation in Europe could very likely affect global equity markets in 2011 as the Eurozone continues to struggle with its debt problems. Watch out for problems in Spain because Spain is too big to fail and too big to save.
- Rising interest rates in the U.S. could put a huge damper on U.S. corporate profits, the housing market and the ability of the country to finance its growing debt. Watch for the direction of U.S. interest rates. If the bond vigilantes come after the United States, it’s game over for this recovery.
- The rising price of oil could become a major drag on the economy. Watch for oil to cross $100/bbl. on a sustained basis.
- New moves to install “austerity” programs by the new Congress could choke off the recovery. Watch for moves to limit the powers of the Federal Reserve and moves to cut spending that could easily create a double dip recession.
- The housing market continues to languish. Watch for a “double dip” in housing.
- Unemployment remains stubbornly high. Watch for a retreat in recent employment gains.
- The coming default crises for states and municipalities. Watch for cities and states to lay off workers, default on their bonds and even declare bankruptcy.
- The slowing Chinese economy. Watch for the Chinese economy to continue to slow and the Shanghai Composite to enter bear market territory.
- The announcement of QE3, QE4, QE5…..Watch for the Federal Reserve to announce the continuation of QE2 past the June expiration of QE2.
* John Nyaradi is the publisher of Wall Street Sector Selector, an online newsletter specializing in sector rotation trading using Exchange Traded Funds