One of the main points of contention inWestern society now is that the rich are feeling less rich, the poor arefeeling poorer, yet both are about to betaxed more heavily in order to try to turn around the huge indebtedness in manycountries´ economies. This is likely toset the trend for a lack of consumer spending in 2010 which may make positivestockmarket returns hard to come by unless investors are in the right sectors.Those sectors should be commodities,(particularly gold, silver, wheat, coffee, sugar, corn, oil and natural gas),and Technology.Investors should also bein those countries which are not joined at the hip with the West, notably India and to a lesser extent Brazil, China,Russia(oil and natural gas play).Forgetdirect exposure to the UK, Europe (except Germany), and the US, though it ispossible the dollar may rally temporarily this year on gradually improvingeconomic sentiment and consequent greater expectation of a rate rise to combatany inflation threat.In reality it is unlikelythe USwill raise rates at all in 2010, and as more Fed board members speak outagainst a rate hike, the dollar will slide and gold will rise.
When economic forecasters are asked fortheir favoured currencies in 2010, they struggle to find any compellingargument for either the euro, sterling or the US dollar…, or the yen, or theSwiss franc.Purely from a chart /technical perspective, the Australian dollar looks an attractive buy if itfalls below US$1.12, but from a fundamental perspective the Aussie should dowell if commodities perform this year, as should the Canadian dollar, anothercommodity currency, which is expected to comfortably move through parity to theUS dollar.The ultimate currency, Gold,moved strongly on the first day of trading for 2010, and as other mainstreamcurrencies lose ground this year, we could well see dramatic moves in gold,possibly up to $1700-1800, especially if more countries default on debt and thegeopolitical factor returns.If Golddoes perform this strongly, Silver should outperform it.With the FTSE100 down 22% over the decade,Gold by contrast was up 233%, and it was up 24.8% in 2009.Japan´s Nikkei was down 44% over the decade.Brazilwas up 301%, India up 249%, China up 140%,and Russia´s Micex up 802%.Brazil, Indiaand Chinawere coincidentally each up 80% in 2009.
Sterling is expected to fall through parity to theeuro in 2010, finishing the year at around £1.04 for 1 €.This is from a technical perspective, butfundamentally too there is not a great deal to support the currency.Like the US,the UKsuffers from an over-extended housing sector and a debt-financed,consumption-driven economy. The UK´slarge budget deficit and rising national debt is calling into question thecountry´s triple A sovereign credit rating, and there is the uncertainty of a GeneralElection, likely to be called in May.Sterling has fallen 23% sincethe onset of the financial crisis inSeptember 2007, and more than 29% against the euro.
The Indian stockmarket should reach 23,000from current levels of 17,500, and Brazil’s Bovespa stock index could well climbto a record as soon as next month after advancing beyond 70,000 yesterday tonear a so-called Fibonacci retracement level, according to Auerbach Grayson& Co. The Bovespa should rise aboveits May 2008 intraday record of 73,920.38 in the next six weeks if it breachesthe 76.4 percent retracement level of its decline to a three-year low, said theNew York basedbrokerage house. Investors couldtherefore see an end-year figure for the Bovespa of 84,000, representing a 20%advance.
Wheat is expected to climb from currentlevels of $550 a bushel to over $700, and Coffee could reach $180 per lb.Sugar prices doubled in 2009 as bad weatheraffected Brazil and Indiaproduction, and now that global stocks have shrunk to record levels, pricescould go substantially higher.
From a fundamental perspective, thetechnology sector is expected to outperform, particularly during the firstquarter which is traditionally a quiet period for Tech.Even those with limited budgets cannotrefrain from climbing aboard the hand-held communication devices available fromNokia, Sony, Research in Motion, Palm and Apple.The “mobile internet tsunami” to quote JimCramer of CNBC, has only just begun.
Favoured plays:
Cautious risk:Cash(Australian Dollar, Canadian Dollar, Indian Rupee); Index-linked bonds
Nicholas Chappell has the following personal investmentexposure: Gold (€, A$, C$) 38%, Silver (US$) 5%, Coffee 5%, Cotton 2%, Wheat 4%,Commodities (hard and soft) 11%, Technology 8%, India 4%, China 4%, Latam 11%,Energy (electricity, LPG, natural gas, hydrogen) 8%
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This communication is forinformational purposes only.It is notintended as an offer or solicitation for the purchase or sale of any financialinstrument or as an official confirmation of any transaction.The price of shares and the income from them may fall as well as rise.Past performance is not a guide to the future and investors may not get backthe full amount invested. Exchange rates may also cause the value of underlyingoverseas investments to go down or up. Investments in emerging markets andhedge funds can be more volatile and the risk to capital is greater.Allmarket prices, data and other information are not warranted as to completenessor accuracy and are subject to change without notice.Market analysis is a resume of data suppliedto McLaren Asset Management by some of the world’s leading investment housesand although McLaren Asset Management has given its opinion as to how the datacan be interpreted, investment shouldnot be embarked upon without full analysis of the risks involved and a carefulstudy of the sales prospectus, where applicable.
