December 28th, 2009
06:51 AM GMT
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.
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