What will 2009 bring ?

What will 2009 bring?

After a very classical last few days into the end of 2008 with small bids in equities between Christmas and New Year the big questions on everybody's mind is what 2009 will bring. The only thing we know for sure is that nobody can forecast it and that we all need to be humble and try to capture whatever the opportunities will be in 2009.

My two biggest questions for 2009 are:

• Will all the government and central banks action prevent a GD-II or will the underlying forces behind the unwinding of the last 20 years increasing leverage turn out to be too forceful an opponent?


• Will 2009 be a year where geo-political events continue to be local problems in the mind of the financial markets or will they begin to be seen as central global issues effecting global markets more directly?

I still believe more in the latter for both of the questions above.

The development in H2 of 2008 is below compared to the 1929 and 2002 development. It's interesting to see how all periods saw a year low in October/November before a rebound into year end.

Will H1 1930 or 2003 be any help in guiding us for 2009. The first graph probably illustrates what is beginning to be the hope (and consensus?) of most investors with a nice Obama inspired rally. See how we after a slow start to 1930 rallied into end of Q1 before we began to roll-over. In 2003 we had a very positive first two weeks before the market sold off into the low in early March and then the market never looked back.

But of course a more disappointing development could also be as illustrated below where we actually reach the S&P 600 level into early spring of 2008. Both graphs are examples of simulations based on a 40% yearly volatility in S&P.

None of us knows the outcome, but for me a S&P level of 600 seems a reasonable target for 2009 considering a S&P earnings of 50-60 for 2009 and P/E of 10-12, but only time will tell.