At the beginning of the year, our Research Analysts take a look at the themes that may influence the markets during the year. While this is an ongoing process throughout the year, we wanted to share the issues we think may dominate the market movements in 2012.
Middle East Turmoil
We suspect the unrest in the Middle East will drive energy prices higher. Many of the leaderless countries in the Middle East are still struggling with the change, and it is uncertain how democracy will play out in these countries. Between the recent bombings in Iraq and Iran threatening to close the Strait of Hormuz, we suspect oil prices will increase in 2012.
European Threat
Europe’s debt crisis is still a main concern as Greece warned the world on Tuesday, Jan 3, that it will have to leave the euro if it fails to secure the country’s second bailout from the European Union and the International Monetary Fund. While we are unsure if this is just a threat or part of their plan to default, the situation doesn’t help sentiment in the U.S. markets. However, we have seen coordinated actions by several major central banks across the globe, including the Federal Reserve, to prevent Europe from bringing down the world’s economy.
China’s Growth May Slow
China may not be able to sustain their 10% growth rate throughout 2012. Their economy has been based on a real estate boom in their country. Their continued growth should come from the same source or transfer to another source. There have been indications that China’s construction boom may be slowing down, and that could affect raw materials and commodity prices.
Low Interest Rates
With Operation Twist still in play, rumblings of Quantitative Easing 3, and the Fed’s promise to keep interest rates low until mid 2013, we do not see any major increases in rates soon. Likewise with the jobs market growing so slowly, there is little cause for the Fed to increase rates.
Jobs Market
During the recession, we lost almost 7 million jobs. In 2011, we only saw a total increase of 1.6 million jobs, indicating the healing process is a slow one. While we do think the labor market will take a turn for the better, we are far from where we need to be.
The Presidential Election
By the end of February, 11 states will have had their say in who the Republican candidate may be. By March 6th, 11 more, including Georgia, will have contributed their input on the next candidate. We believe once we have more clarity on who may run against President Obama in November, we will also get a little clarity on the issues that will drive the economy.
At Henssler Financial we believe you should Live Ready. We remain vigilant in watching the issues that may affect the markets throughout the year. The are just some of the issues we are currently watching. If you have any questions, you may call us at 770-429-9166 or e-mail at experts@henssler.com.