Unlocking Real Value Blog

Top Ten Predictions for 2011

First, I want to wish everyone a Happy and Healthy New Year and a great 2011. I thought that I would end the year with some predictions about what I see happening next year. No guarantees here – just having some fun before I head out on vacation.

I’ll start with the macroeconomic picture, and then talk about the financial services industry.

10 – Stocks will once again have a better year than the economy as a whole. I am “mildly optimistic” heading into 2011. The one thing that I have learned is that you can’t fight the market’s momentum.

9 – Housing will continue to struggle in 2011 and unemployment will remain stubbornly high. The jobless recovery will continue, but there will not be another recession.

8- The much-talked-about municipal bond crisis may develop, but will not be as bad as the doomsayers predict. Increased municipal failings will not be surprising – but this will not be another crisis of the magnitude of the housing crisis.

7 – The bipartisan spirit of the lame duck Congress will end quickly – particularly over spending – and the gridlock predicted after the election will begin. This is not necessarily a bad thing for the markets – just the reality.

6 – The Federal Reserve will not raise interest rates (that will happen in 2012).

5 – The crisis in the Euro zone will continue and the PIIGS will continue to give us heartburn – but the Germans will lead the EU to the rescue and the crisis will not negatively impact the US (maybe on particular days, but not overall).

As for the financial services industry:

4 – It will be another year of net advisor losses for the wirehouses. The allure of going independent coupled with continued negative press will be the straws that break the camels back and influence advisors to make the change.

3 – UMAs will continue to grow at the expense of SMAs and ETFs will continue to grow at the expense of mutual funds, although ETFs will continue to fight negative press surrounding the plethora of derivative-type ETFs that are being developed.

2 – Fidelity will have at least one reorganization (not hard to predict based on past trends!) and Schwab will continue to grow its managed accounts AUM and surpass at least one, if not two wirehouses.

1 – Consolidation among money management firms and RIAs will continue as firms continue to cut costs and search for synergies to help them distinguish themselves from the pack.

Let me know your thoughts – what you agree with and what you disagree with.

Happy New Year!

One Response to “Top Ten Predictions for 2011”

  1. I disagree that there will be any municipal bond crisis. I’ve heard the comments by Meredith Whitney and I think she’s just looking for publicity at this point. Will there be a few defaults? Very possible. But 50-100, as Meredith is predicting, is wildly pessimistic, in my opinion.

    State and local governments will cut services, renegotiate pensions and raise taxes, but they won’t default. A rising stock market, an improving economy and steady increases in home prices all will mitigate the government’s revenue shortfalls.

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