Bulletin of Economy 2010 Strategy

The 2010 Outlooks

Strategists, on average, see the S&P 500 gaining 9.5% to 1,222 and earning $76 per share in 2010

• Despite the view that the S&P 500 will gain over 9%, the consensus is to "underweight" or "benchmark" US equities
• Oil will rally slightly to $80
• Gold will rally to $1,213
• The Dollar vs the Euro will end 2010 at 1.45
• The US economy is expected to grow 3.1%
• The FRB will not hike interest rates until at least mid-2010

Themes for 2010:

1. Government balance sheet risk and Rising taxation
2. Alternative yield strategies
3. Financial sector rehabilitation
4. Corporate cash flow beneficiaries
5. Rising global growth and Emerging market consumers
6. Commodity price inflation
7. Return of active management
8. Alternative energy
9. Asia & Emerging-Market consumer (large-cap EM financial and consumer related stocks & US and Japanese multinationals)
10. Tightening plays as markets tighten by raising the price of commodities, the yield of gov't bonds, value of EM currencies: long global banks (including Japan) and large cap energy stocks
11. Hedge tail risks such as bubbles in China and gold, a double-dip, trade protectionism or a US dollar crisis by buying puts on volatility
12. Buy US companies that generate a high percentage of sales from BRICS
13. Invest in companies with high operating leverage that currently run at the bottom of their margin cycles
14. Buy stocks high Sharpe ratio
15. Looking ahead to 2H: free cash flow and dividend growth
16. Significant recovery upside but also downside risks: best of both worlds high-quality cheap stocks on normalized earnings
17. M&A up cycle beginning: buy aquisition targets
18. Rising rates: long brokers and short REITs
19. Stronger US dollar: long retailers and short energy
20. Overweight US versus Emerging Markets: long US financials and short EM financials
21. Flows follow: stay with value over growth
22. Uncertainty to decline: short S&P 500
23. 12m forward volatility
24. Stock rally to continue in a low rate world
25. Buy cyclicals now, own defensives later in the year
26. S&P 500 to rally to 1,300 in 1H then fall to 1,250 by year-end
27. Forecast Fed target rate unchanged until 2012