2008: Year of the Bear?
We ended 2007 with a worsening mortgage meltdown, plummeting consumer confidence, huge equity market volatility, and ever-more expensive war on terrorism, there seems little doubt that 2008 will be a lackluster year for most stock investors, at best.
However, since 2008 is a presidential election year, you can expect the Bush administration to go all out to boost the economy and make the Republican Party look good. We are already seeing signs of this in the Fed’s recent interest rate cuts, and the pending deal to bail out desperate subprime borrowers. (See
“Mortgage Bailout Could Make Crisis
Worse.”)
Will they succeed or will 2008 mark the beginning of a major recession?
My guess is that official economic statistics will continue to paint a rosy picture, while middle
class Americans suffer even more pain from rising interest rates on credit cards, higher mortgage
payments, and higher prices for everything they borrow.
What About the Stock Markets?
As I have argued here for several years, just to compensate for the real rate of inflation (which is
now about 12% , in contrast to the “official rate” of 2% to 3%), you will
need to get a 12% return on your investments in 2008.
I don’t expect most stocks to return anything like that much. However, there will be exceptions.
I expect agriculture-related stocks, for instance, to be among the top-performing stocks, as well as
energy-related stocks. (See our new picks at TheInvestorReport.com)
Precious Metals & Foreign Currencies
I also expect precious metals (particularly gold and platinum) and strong foreign currencies
(including the Canadian dollar, Australian dollar, and euro) to resume their meteoric rise in 2008. The recent downturn in prices for these investments is in my opinion principally a result of end-of-
the-year profit-taking, and investors selling to cover their 2007 taxes, combined with investor
nervousness over extreme market volatility.
Preparing for Recession
Typically authorities don’t admit a recession exists until long-after the fact. This will be doubley true in 2008, as the Bush administration does everything in its power (including refusing to acknowledge economic reality), to win as many votes as possible for their party in November 2008. The current 12% real rate of inflation alone combined with stagnant wages is enough to further depress the living standards of most middle class families.
The by-words for 2008 will be “frugality,” and “preparing for the worst,” while hoping for the best.
