Emerginvest Blog

As one of the most shocking and dismal economic years of our time comes to a close, it deserves a moment to take a look at the vast shifts which have transpired. Major banking giants which have fallen, stock markets have plummeted, and a whole host of issues have reared their head for the coming year. Yet, as we look ahead there are quite a few points of optimism. There are strong buying opportunities, and a sense of worldwide cooperation – both for investors, and for international leaders – which is arguably unique to this crisis, and will undoubtedly shape the next wave of future international financial decisions for the coming generation.

First, a quick, partial summary of international stock markets for the last year:

Developed:

US -42.32%
UK -34.31%
Germany -42.15%
France -44.28%
Italy -48.91%
Belgium -54.96%
Spain -40.69%
Scandanavia -51.09%
Netherlands -52.63%
Russia -65.72%

Emerging:

Hong Kong -49.44%
China -63.75%
Australia -45.71%
India -50.40%
Singapore -48.97%
Korea -40.38%
Taiwan -46.25%
Malaysia -38.79%
Saudi Arabia -58.72%
Israel -50.99%

Frontier:

Ghana +60.17%
Malawi +26.03%
Ecuador -4.45%
Costa Rica -7.85%
Cote D’Ivoire -9.07%
Morocco -9.46%
Panama -13.68%
Bangladesh -15.86%
Slovakia -19.40%
Zambia -28.64%
Bahrain -30.97%

There is no shortage of gloomy economic news surrounding 2009. It seems to be the daily mantra of newspapers, and is becoming especially amplified as it is beginning to affect the working person’s life. Yet, amidst the gloom, there is certainly hope that it will be a finite pain. Especially when looking at the situation from a non-US perspective, some markets are simply better poised to weather the storm than others on a macro level. So, here are the things, both good and bad, to look for in the coming year:

The Bad

Massive Job Loss:

With some predictions estimating the US unemployment rate approaching 10% at its peak next year, there its seems that the fear of layoffs will be omnipresent for most of next year.

Housing:

For most homeowners, the next year will be exceptionally tough as the continuing buildup of housing inventory continually drives prices down further. In addition to the financial impact to those attempting to sell, many can expect a strong psychological impact, as some estimates put “underwater” mortgages (those whose home value is worth less than their mortgage), which may or may not induce a sweeping countermeasure from the government to subsidize mortgages.

Credit:

As tough as the credit markets are now, there will undoubtedly be lingering problems in the credit sector before they begin to get better. For the average American, the added difficulty of attempting to secure loans for mortgages will remain a problem area for the beginning part of the year (See the “The Good” section as well however).

Volatile Stocks:

For developed markets especially, the first part of next year looks to be an especially arduous period. We’ve already seen the exceptionally volatile nature of stock markets worldwide in the last few months, and can expect to see continued volatility as more negative reports are released in the first few months of 2009.

The Good

Great Retail Period:

As retail has just come out of one of their most brutal holiday seasons, a tremendous surplus will still be available for the beginning part of 2009. For anyone with some cash reserves, it will be an exceedingly good time to scoop up bargains as most retailers will be dumping inventory to generate cash flow.

A Light at the End of the Tunnel:

Many experts predict the recession will last anywhere from 9-15 months. If this is correct, that means that at a best case the US will be out of the crisis well before this time next year. In the worst case, we should still be hitting the apex of the storm by mid-next year. While the markets will still be depressed, it will be a downhill battle afterwards. Either way, the psychological act of giving definition to the face of an ambiguous monster makes it more manageable. Even though some Americans will be out of jobs or facing hardship, they will hopefully be able to look forward and know there is only a finite amount of time left.

International Growth:

While many of the developed markets will be experiencing the protracted recession, most experts also agree that the first signs of revival will be coming from the leading emerging markets. China in particular has proven, while not indestructible, has all the makings of emerging as a major economic power. Especially as estimates still have growth in terms of GDP at 6-7%, it looks to be a an exceedingly good place to put any extra investment dollars for the time being.

Golden Investment Period:

For every action, there is an equal and opposite reaction. While stock markets have tumbled, and look to continue to do so in the near term, 2009 looks to be an exceptionally promising year to buy as markets bottom out. There is no doubt that for those who time their investments with a reasonable degree of accuracy in the coming year, stand to gain extremely significant returns in 2010 and 2011.

The point of this extremely simple overview is to underscore the fact that there truly are always positives to any situation. While the coming year will be an arduous one for many, including job loss and financial hardship, there *is* a light at the end of the tunnel, and the financial upswing will be all the sweeter for it. In this case, it simply isn’t a rosy, feel-good statement. There will be a concrete chance for investors (especially those who look to international horizons) to recoup a great deal of their losses as markets rebound over the next few years – there is simply a finite level of pain we have to collectively endure first. From all of us at Emerginvest, we wish you the very best of the Holidays and we look forward to entering the New Year with you all.

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Filed under: Developed Markets, Emerging Markets, Frontier Markets, Jonathan (Marketing), World Analysis