Unlocking Real Value Blog

A Look Back At My Top Ten 2011 Predictions – How Did I Do?

As the year draws to and end, and before I release my predictions for 2012, I thought that it would be fun to look back on my predictions for this year. Here is the list with updated comments (which are in bold).

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. The market is essentially flat and the economy  remains weak with a few bright recent employment reports. Mild optimism was perhaps warranted, but not rewarded.

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. This predication proved to be pretty accurate. We are pretty much where we were a year ago (wasted year?).

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. I was wrong here – this crisis never really developed even though a number of large bankruptcies occurred. 

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. Here I was correct – the political environment is worse today then it was a year ago. More on this in my 2012 predictions.

6 – The Federal Reserve will not raise interest rates (that will happen in 2012). Interest rates have not been increased and if anything, whatever inflation threat there was has abated.

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). Kind or right – kind of wrong. The Euro crisis has gotten worse and the German leadership has been less than stellar. The jury is still out as to what the impact on the US will be – that again is more of a 2012 prediction at this point. But Europe = heartburn was certainly true!

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. Yes and no – the trend toward independence continues but slowed more than I thought. However, this slowdown was do more to general inertia caused by economic uncertainty than by anything positive that the wirehouses did to make themselves more attractive. Few advisors are willing to make changes that will affect their clients when there is so much uncertainty already.

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. UMAs did continue to grow as did ETFs. The negative press about ETFs is still out there, although did quiet down somewhat during the year. Surprising was the growth of advisor-managed accounts – didn’t see that one coming!

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 warehouses. Of course Fidelity made news with changes in staff and strategy and Schwab continued to grow. 

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. Consolidation did continue, although slower than I thought – another symptom of a year in which economic and market uncertainty caused many people to sit on their hands and wait for the dust to clear.

All in all, I would say many of my predication were accurate. But the year was a frustrating one in that we find ourselves pretty much exactly where we were a year ago – the markets are pretty much at the same levels, the economy is growing at the same rate, unemployment remains high, etc. etc. etc.

I think 2012 is going to be a little more exciting – look for my new predictions next week!

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