My partners over at The Finance Blog Network have begun a new group writing project where we've been asked to make our end of year predictions related to personal finance.
First, the easy one. The financial fubar we're in will worsen as the year ends, compounding with a further reduction in the global stock and bond markets. As time goes on, and the few remaining big banks experience their own pain, stocks will shrink, sending the Dow down near 6,000 (yeah, you read that right) and sending bonds down with it. After all, who wants to own corporate bonds? The only "safe haven" will be Treasuries and they'll pay next to nothing, if anything at all.
Sectors that will stay strong (i.e., won't fall as far as fast) are staple industries, like food and beverage companies (e.g., Coca-Cola, Pepsi, and McCormicks, to name three).
There will be more bank failures, worse in Europe than in the United States, though the failures here will occur (but they may be quiet); we'll call them "mergers." I don't think there will be many bank runs, but there will be some.
Inflation will stay in check, but it won't feel like it because food prices and the seasonal upswing in energy prices will happen, just like they do every winter. Unemployment will rise to a nationwide 8- to 9 percent. This could get really ugly.
(It's a good thing I'm independently wealthy.)
(What? I'm not? Oh, crap!!!)
The dollar will appreciate relative to the Euro, not because the US economy improves, but because Europe's economy will decline relative to ours.
The US presidential election won't matter. Really. Obama brings hope to roughly half the population. McCain brings Palin. Either way, we'll feel better about things for a while.
I think Obama will win, but I've been wrong many times on these sorts of things. I thought Kerry would trounce Bush. That's my most recent failure in picking these things. So maybe I'm due for a winning bet.
Either way, we won't get that big tax cut both parties have promised. Nor will we get health care relief, war relief, or better corporate governance.
America is a huge ship, not easily righted. It cannot turn on a dime, nor can it be started quickly if stalled. We'll -- at best -- muddle through. At worst, we'll re-live the 1930s.
On this one, I hope I'm wrong.
Money isn't everything. It's the only thing. Wait. That's only for football.
Enjoy life. Spend time with your family.