We thought we would compile a list of 2011 predictions of what’s to come in the year ahead … and save them for a bit until we were a couple of months in to get a better sense of their validity, outside of the typical year-end predictions season.
While no one has a crystal ball, we always love digging into others’ outlooks. Without further ado, below please find the links to banking, consulting and industry perspectives on 2011, along with some snippets from each we found interesting. Enjoy
Our revised forecasts for 2011 and our first forecasts for 2012 tell a story of continued global recovery. Most striking, given our long-standing downbeat view on the US, we now show a substantial acceleration in our US growth view.
Underneath this robust story is a gradual shift in the mix of growth. We expect a pick-up in GDP growth in the advanced economies through the year and even more clearly into 2012, led by the US. And, while we expect emerging markets (EM) and BRICs growth to remain solid, we see a mild deceleration in growth through 2011 and stable but high growth in 2012.
First Fed rate hike pushed out to 1Q12, then 75bp in 2Q and 3Q, with a target of 2.50 for end-2012
Downside risk: Spillover from the sovereign crisis, and housing imbalances that threaten home prices and credit availability. Upside risks: The just-proposed tax deal could add a percentage point to growth over 2011, as the policy mix shifts from monetary accommodation to fiscal stimulus.
New rules: no major currency should be considered safe. “It’s the economy stupid” was once a popular slogan during the US presidential campaign in 1992, and is the economic reality for currency investors. The traditional Big Four currencies (USD, EUR, GBP and JPY) will be challenged in 2011. We think that the US is trying to solve their current trilemma – pursuing a balanced budget, buoyant consumer activity and a trade surplus all at the same time – by downplaying the value of the dollar.
US gains speed making the likelihood of a double dip remote Consumers emerge from hibernation Waiting for a turnaround in housing Fed taking out all the stops trying to support economy Slow and winding road back to full employment
Research Seminar in Quantitative Economics – We expect the Fed to wait until 2012 before it starts gradually reducing the size of its balance sheet, and as long as a year beyond that until it begins to increase short-term interest rates. Residential building picks up, and gains in exports begin to outpace rising imports, but government purchases continue to shrink.
The upgrading of the U.S. economic outlook is attributable to the expanded contribution to growth of both consumer expenditures and business investment. We now expect that consumer spending will grow by an average of roughly 3% this year and next, almost double the gain in 2010. Confidence and purchasing power have been bolstered by the renewed Fed commitment to low interest rates, sustained and enhanced tax relief, slowly improving job markets, in addition to sharply lower debt-servicing costs.
Estimated bonuses will be flat to down 5 percent on average for the largest global financial services firms compared with 2009. Asset management, hedge fund, and private equity firms will receive slightly higher bonuses (10 to 15
percent), while fixed income and equity personnel will see the largest declines across the globe.
Much of the ‘developed’ world has made only 30% – 40% of the adjustments needed to adapt to the new environment and challenges. The depreciation of the US dollar against major currencies has led to many investors shifting into gold. Central banks have also become net buyers of gold. We expect to see this continue in 2011, especially as gold mine supplies remain constrained.
Unlike Euroland or the United Kingdom, which appear to have gone on an extreme fiscal diet, the American answer to a bulging waistline is always “mañana.” Blame it on poor education, blame it on globalization, but an ongoing rebalancing of rich country/poor country wages inevitably will keep U.S. wages compressed as deficit spending serves to reflate commodity and end product prices in future years but not paychecks.
The fact is that annual budget deficits in the trillions of dollars add a like amount to the stock of outstanding dollars, resulting in currency depreciation, higher import inflation, and a degradation of dollar based assets in global financial markets.
Apartments easily outrank all other property sectors: favorable demographics and the housing bust should increase renter demand, and some interviewees forecast rent spikes by 2012 in some infill markets where development activity has ground to a halt.
Eventually population growth will absorb the overhang in housing supply, but location preferences show signs of shifting away from bigger homes on the suburban fringe to infill locations closer to 24-hour markets. Reversing decades of moving away from city centers, “more people will regroup in areas where life is easier, more efficient, and less car dependent”— that is, closer to shopping districts and workplaces.
We are more optimistic about 2011 real GDP growth primarily because QE2 implies that the Fed will be purchasing all of the additional Treasury debt issued in conjunction with the Obama-McConnell tax and unemployment insurance compromise. We currently see more upside risk to our 2011 real GDP growth forecast than downside risk.
Although U.S. money market interest rates are expected to remain steady and low as a result of the Fed delaying any policy interest rate increases until early 2012, longer-maturity interest rates are likely to drift higher because of stronger credit demand, a mild increase in the actual inflation rate and the expectation of Fed interest rate hikes in 2012.
