The Year Ahead

We move into the New Year with optimism.  Later in the month the Federal Reserve will probably lower interest rates a quarter of a percent and then turn around and do it again the next time they meet.  Fears of a hard landing or a recession are touted by the same fear-mongers that predicted the demise of the human race due to Y2K problems.  Revenue and earnings numbers have declined slightly at most companies, but results are still good, if not even brisk.  Consumers and business are still spending money, but at a slightly slower pace.  Workers still are pouring money into their 401k funds, and baby-boomers still need to aggressively build their soon-needed retirement accounts.  Oil prices will probably soften during the year.  Technology will move forward and businesses will need to upgrade their computers and software.  Biotech companies will release new drugs and doctors will continue to prescribe them to people in bad health. We are likely to see some sustained rallies during the year as the massive amounts of money on the sidelines is forced to enter the markets.  Market volatility is probably going to be with us long-term.  This volatility should provide excellent money making opportunities for the short-term investor.  Long-term investors may be disappointed because the markets are more likely to remain in a broad trading range than making any sustained move to the upside.  At the end of the year long-term investors may find lukewarm returns on their investments due to a generally sideways, choppy market that may have essentially gone nowhere for those people employing a buy and hold strategy.  This is the year to be a short-term investor.  It’s also the year to update the paperwork on your brokerage account so you can sell stocks short if the market decides to lose altitude for a couple of weeks.  At least you can make money when the market is putting in a brief down move.  And while you’re reviewing your brokerage account, make sure it allows trading in options, which are a good hedge strategy to lock in gains on a position no matter which way the market moves.  Looking back to January from this coming December will show many profit opportunities for those who wisely get into the game.