The end of a year (or the start of a new one) is a time of reflection, a time to reassess life and your financial portfolio. Last year was tough for the global economy but a lucrative one for investors in stocks or gold.
So what about 2010? These are some of the trends to consider when investing.
1) Interest rates are bound to stay low. With governments trying to encourage economic growth, financial experts expect central banks to keep money cheap. What does that mean? "People are getting no return on their cash, no return on their bank accounts," Keith Wade, economist at Schroders, told me. "They will continue to look for yield."
2) Emerging markets will be in focus. With fund managers concerned about sluggish growth in the U.S. and Europe, many say they will hunt for higher returns in places like Asia. Asia has been recovering faster than the West. Stocks and property have run up in the past several months and brokerages like UBS believe the trend will only continue all year. Some governments have taken measures to rein in speculators, but in places like Hong Kong, their hands are tied. This city's monetary policy tracks the U.S. because its dollar is pegged to the greenback.
3) The U.S. dollar will likely stay weak but be prepared for a few surprises. Richard Duncan, author of "The Dollar Crisis," argues the U.S. economy is structurally flawed and too burdened with debt, which hurts the prospects for the dollar. He says with the U.S. government borrowing so much to finance its massive spending programs plus two wars, the outlook for the dollar will only worsen. However, with so many financial experts down on the dollar, some are starting to wonder if the greenback might swing in the other direction at least for a short while in 2010. One theory is that the dollar makes a comeback as investors flee to dollars to shelter themselves from market volatility.
And given the lingering fears of another Dubai debt crisis or a double dip recession, there will be no shortage of market jitters.
With the revision of China’s 2008 GDP to $4.5 trillion, the nation now is poised to overtake Japan as the world’s second largest economy.
With 8 percent growth forecast for 2009 and Japan’s economy, which stood at $4.9 trillion last year, emerging from its worst recession since World War II, economists predict that China soon will stand second only to the United States in total economic output.
“It is only a matter of time before China's total economic volume surpass that of Japan given China's robust growth,” Xu Lianzhong, a researcher with the National Development and Reform Commission, told state-run media.
If it overtakes Japan, it will complete a dramatic five-year economic rise that saw it leap-frog the economies of the United Kingdom in 2005 and Germany in 2007.
The power of such rankings, however, is more emotional than substantive. China’s explosive growth reflects newly created wealth, not a zero-sum game: The gains of China were not the cause of equivalent economic losses among the world’s top economies. Indeed, the growth of China has been a boon to all developed economies across the world.
Still, the emotional weight of such rankings is strong. Whether China’s economy has already eclipsed Japan may be subject to debate, but the opening of the Wuhan-Guangzhou bullet train line this weekend gives China sole claim to the fastest trains in the world – once a point of pride in post-War Japan.
And on Sunday, China’s Premier Wen Jiabao made his strongest statement yet to state media that China won’t bow to foreign pressure to float the value of its currency – which implicitly suggests China now has the clout to weather criticism from its top trading partners.
So once it overtakes Japan, will it also overtake the U.S.? Most economists say yes – but not anytime soon.
China’s total economy is still one-third the size of the U.S., and conservative estimates don’t see its total output eclipsing the U.S. until around 2025.
Also important to keep in mind what Xu Lianzhong, from the National Development and Reform Commission, told China state media: “What matters more is the per capita figure, and in the case of China, the total figure has to be divided by 1.3 billion.”
Even if China has already eclipsed Japan in total economic output, the average Chinese income in 2008 was $3,200 – compared to $38,000 in Japan.
About Business 360
CNN International's business anchors and correspondents get to grips with the issues affecting world business, and they want your questions and feedback.