2010 outlook: Flat is the new up

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After the doom and gloom of 2008 and heady gains of 2009, experts think next year might be a calm, boring one for stocks. There's nothing wrong with that.

By Paul R. La Monica, CNNMoney.com editor at large
November 20, 2009: 12:48 PM ET



NEW YORK (CNNMoney.com) -- If 2008 was the year the stock market almost died and 2009 was the year that the market miraculously sprung back to life, then what will 2010 be?

It could wind up being a boring, relatively stable year. And you know what? There's nothing wrong with that.

Some market experts think that after last year's despair and this year's glee, everyone may take a deep breath and realize that the economy is neither sinking to an abyss nor on the road to a robust recovery.

"I think the market could fall a bit or stay flat during the first half of the year since the economic outlook is still relatively weak. But I'm looking for a strengthening economy sometime in the middle of next year since interest rates should stay low," said Doug Ober, chairman and CEO of Adams Express (ADX) and Petroleum & Resources (PEO), two closed-end funds that invest mainly in U.S. stocks.

Ober said that he's hoping to take advantage of any pullback in the markets over the next few months, particularly in the technology and consumer sectors.

He said that Microsoft (MSFT, Fortune 500) and Intel (INTC, Fortune 500), for example, should benefit from the launch of Microsoft's Windows 7 operating system.

As for consumers, Ober said that because he is not expecting a substantial economic rebound, he's steering clear of retailers and investing more in staples like Coca-Cola (KO, Fortune 500), PepsiCo (PEP, Fortune 500), Procter & Gamble (PG, Fortune 500) and Unilever (UL).
John Norris, managing director of wealth management with Oakworth Capital Bank in Birmingham, Ala., agreed that investors shouldn't get too optimistic about next year.

"The economy might experience tepid growth of about 2% next year. With 2% growth, people won't be as quick to put money in the market. We've priced in a good recovery and it might not live up to its billing," Norris said.

But that doesn't mean the market or economy are going to fall apart, Norris added. It just looks like a lot of the easy money has already been made in this rally now that the S&P 500 is up nearly 65% since March.

"This year, you just had to be in the market to do well. Next year will be more difficult. At the end of the year if the S&P 500 is up about 8%, that's probably about the best we can hope for," Norris said.

Norris also said that investors have to be more discriminating in 2010 - especially when considering some of this year's hottest sectors and stocks.

The financial services sector, for example, has surged this year. Nearly all banks have bounced sharply from their depressed lows - regardless of how strong their balance sheets really are. As a result, many bank stocks are significantly more pricey than they were only a few months ago.

So a strong focus on identifying winners and losers in an individual sector, and not betting the ranch on an entire group of stocks, may be one of the keys to successful investing in 2010.

Valuations matter once again as well. The S&P 500 now trades at about 14 times 2010 earnings estimates, according to Thomson Reuters.

That's not absurdly expensive by any means. But back in early April, just as the market was beginning to rally, the S&P 500 was trading at only 11 times next year's earnings estimates.

"Everything was cheap in early 2009. Now you have to be a lot more selective," said Blake Howells, director of equity research for Becker Capital Management, an investment firm in Portland, Ore., with about $2 billion in assets. "That's true for the market as a whole."

The Buzz is going on a break: This is the last column for awhile since I will be out on leave for several weeks. But I just wanted to take this opportunity to thank all the readers who have e-mailed me and contributed to the Talkbacks throughout this year.

I appreciate all the feedback and look forward to incorporating more of your comments into the Buzz columns and videos in 2010. Happy Thanksgiving to all and I hope that everyone has a joyous holiday season.

Source : Please click here.

Dow 10,000: First close in a year

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Note : Dow Indu closed above 10,000 Wednesday and for Malaysian stock market investors, there is something to look forward to. It is a sign of US economic recovery in particular and world's economies in general. We have heard our leaders telling us that Malaysian economy will recover fully by 2012 and if the trend continues that forecast would be realised even sooner.

For those of us who are not quite familiar with investing our monies in stock market, probably it is high time to start learning now. It is "risky" but profitable venture. If you are able to manage the risks properly, there is no reason why you couldn't make a fortune out of your investment... A.S. Kasah


Blue-chip average ends at key milestone for the first time since Oct. 3, 2008 following better-than-expected results from JPMorgan and Intel.







By Alexandra Twin, CNNMoney.com senior writer
Last Updated: October 14, 2009: 6:07 PM ET


NEW YORK (CNNMoney.com) -- The Dow industrials closed above 10,000 Wednesday, ending at the key psychological milestone for the first time in more than a year, following upbeat profit reports from Intel and JPMorgan Chase.

The Dow Jones industrial average (INDU) rose 145 points or 1.5%, finishing at its highest point since Oct. 3, 2008, when it closed at 10,325.38.



The S&P 500 (SPX) index rose 19 points, or 1.8%, and the Nasdaq composite (COMP) added 32 points, or 1.5%.

The advance was broad-based, with 25 of 30 Dow stocks rising. JPMorgan Chase (JPM, Fortune 500), Caterpillar (CAT, Fortune 500), Chevron (CVX, Fortune 500), Hewlett-Packard (HPQ, Fortune 500), IBM (IBM, Fortune 500), 3M (MMM, Fortune 500), United Technologies (UTX, Fortune 500) and Exxon Mobil (XOM, Fortune 500) were the biggest contributors to the Dow's gains.



"Today's market action is all about Intel and JPMorgan and just earnings in general," said Tom Schrader, managing director at Stifel Nicolaus.

He said that the weak retail sales report, released Wednesday, indicates that the economic recovery is not going to be smooth sailing. Nevertheless, "people are looking forward," Schrader added.

While 10,000 is significant on a psychological level, it is not especially meaningful on a technical level.

"I don't put a lot of weight into it just because it's a round number," said Rick Bensignor, chief market strategist at Execution LLC. "The Dow isn't a benchmark for most portfolio managers."

He said that the number isn't going to bring in a new wave of buyers, not after the major gauges have spiked so much in the past seven months.

Since bottoming at 12-year lows in March of this year, the S&P 500 has surged a little over 61% as of Wednesday's close, and the Dow has jumped 53%.

"If the market keeps moving higher it will be because the earnings continue to surpass expectations," he said.

Other than a few modest pullbacks, stocks have mostly managed to keep moving higher, with investors jumping in to buy the dips on worries that they are missing the boat. Repeated calls for a correction of 10% to 15% have gone unmet, and are likely to continue going unmet for the short term, Schrader said.

"The problem is that it is consensus that we need a selloff and consensus is rarely right," he said.

Earnings: Two Dow issues reported better-than-expected third-quarter results, following component Alcoa (AA, Fortune 500)'s better-than-expected profit report last week. The results have fueled hopes that the third quarter could mark a turning point for corporate profits in the same way it seems to have marked a turning point for the economy.

JPMorgan Chase (JPM, Fortune 500) said it earned $3.6 billion in the quarter, as strength in its investment banking business tempered rising loan losses. The company said that consumer loan delinquencies are showing signs of stabilization, but that the trend may not continue.

JP Morgan reported higher quarterly sales and earnings that topped analysts' estimates, according to tracker Thomson Financial. Shares gained 3.3% Wednesday.

Late Tuesday, chipmaker Intel (INTC, Fortune 500) said quarterly sales and earnings fell from a year ago, but topped estimates.

Intel also issued a bullish forecast, saying that it expects fourth-quarter revenue of between $9.7 billion and $10.5 billion versus the $9.51 billion consensus. Intel also said it expects gross margins, a key measure of profitability, in the 59% to 65% range versus the 56.7% consensus. Shares gained 1.7% Wednesday.

Economy: Retail sales fell 1.5% in September, the Commerce Department said, surprising economists who were expecting sales to fall 2.1%.

Sales rose 2.7% in August thanks partly to the impact of the government's Cash for Clunkers auto stimulus program.

Sales excluding autos rose 0.5% in the month versus a rise of 1.1% in August. Sales were expected to rise 0.2%.

Import prices edged up 0.1% in September, the government said, after climbing 1.6% in August. Export prices fell 0.3% in September versus a revised 1.6% in August.

In the afternoon, the Fed released the minutes from the last interest-rate policy meeting. The bankers said that while the economic outlook has improved, activity is still weak. Additionally, most of the bankers raised their economic projections for the second half of the year and for the next two years.

World markets: Global markets were mixed. In Europe, London's FTSE 100 rose 2%, France's CAC 40 gained 2.1% and Germany's DAX added 2.5%. Asian markets ended higher, with the exception of Japan.

Bonds: Treasury prices tumbled, raising the yield on the 10-year note to 3.38% from 3.35% late Tuesday. Treasury prices and yields move in opposite directions.

Currency and commodities: The dollar fell versus the euro and the yen, extending its recent losses.

U.S. light crude oil for November delivery rose $1.03 to settle at $75.18 a barrel on the New York Mercantile Exchange, the highest level in a year.

COMEX gold for December delivery fell 30 cents to $1,064.70 an ounce after ending the previous session at a record close of $1,065. Gold has been hitting record highs almost daily in response to a weak U.S. dollar and ongoing concerns about inflationary pressures.

Market breadth was positive. On the New York Stock Exchange, winners beat losers five to two on volume of 1.35 billion shares. On the Nasdaq, advancers topped decliners by nearly three to one on volume of 2.38 billion shares.

First Published: October 14, 2009: 9:41 AM ET

Source : CNN Money.com