2009 – New Year financial predictions

by RAOUL RUIZ MARTINEZ [email protected]

Raoul Ruiz Martinez is a consultant for Finesco Financial Services Ltd., Glasgow and regulated to advise on capital investments in both the UK and throughout Europe under the MiFID regulation.

It’s the New Year and rather than compose a dreary article which will undoubtedly compound your feelings of failure to stick to your resolutions or further aggravate your personal space with financial commentary, allow me to light your day with a few outrageous predictions for the year ahead.

Investors and advisers strive to identify opportunities that may surface in 2009 and, you never know, perhaps one or two might come true. 

Oil at http://5 a barrel

In 2008 some commentators predicted that the price of oil would bounce above http://www.00 and end the year below that.

Well, let’s be bold and speculate that oil will head for http://5. With 2009 leading into recession and demand slowing due to the worst global economic contraction for almost 100 years, it could be a possibility. In addition to these points, production cuts by OPEC are looking less substantial and the oil producing and less mature countries dependent on oil revenues will be keen to oppose price increases to keep in favour with their nation.

S&P500 at 500

The main reason for one of the major US equity indices to fall will be because of the fall in earnings. US consumers will be unable to extend or get new loans because the banks are writing them off as well as the US corporates. Also, US housing equity is fast disappearing and therefore unable to serve as collateral for loans.

EUR/$USD below http://www..00 and then back up again. What about GBP/EUR?

The Eurozone has problems that have been well disguised in 2008. The balance sheets of the European banks are overexposed to Eastern Europe, which is a region predicted to falter in 2009. Relationships between European member states are looking fraught. Their lack of cohesion during this financial crisis can be witnessed again in the aftermath on the conflict between various government bond spreads and those of the Germans Bunds. What this has to do with the USD is that it is the primary currency of exchange but is not a sound currency and the problems in the Eurozone will be factored in very fast. 

It doesn’t look good for GBP against the EUR as they continue into a sharp recession and anticipated further rate cuts possibly to almost zero are not looking dissimilar to those in the US. A similar series of rate cuts will be instigated by the ECB but maybe not as low as the UK and those of the US and Japan. Expect continued weakness in 2009 with the Sterling heading below €1 before coming back up.

Chinese GDP growth to nil

With exports falling, this will have an effect on the great Chinese economy and the country will be as near a recession as it will get. They have invested heavily in commodity-based investments which are losing value and a monetary policy fueling the excess boom will force some of the problems to come to the surface. The Chinese are fierce and 2010 will undoubtedly see a much stronger year with possible trade wars with other great exporting nations.

Remember that these are not recommendations and simply to provide you with some stimulating reading. If you are thinking about using some or all of these as part of your investment strategy, you should in the first instance take professional independent advice based on a thorough discussion and in-depth assessment of your investment risk profile before considering a leap of faith. Once again, use a registered professional who has the right tools and necessary experience.

Raoul can be contacted at the offices of euroFINESCOs.a. either by telephone on (00351) 289 561 333 or on email [email protected]. Finesco Financial Services Ltd is authorised and regulated by the Financial Services Authority (FSA). Some of the services provided are not regulated by the FSA because they are not included within the Financial Services and Markets Act 2000.