Where was I right and what went wrong?
- As expected companies worldwide expanded their profits thanks to the rapid technological progress which led to more efficiency and lower costs.
- The US consumers also didn´t disappoint me. They stayed in spending mode and worked as the global growth engine as I hoped for.
- China avoided the crash many pundits had predicted. Though the expected re-acceleration of China´s economic growth began not until the 4 quarter, later than thought.
- And the recession in Europa was more deep and painful than feared.
- I also didn´t calculate with the hysteria about the US fiscal cliff which spoiled the global stock markets in the recent weeks.
But the worries from last year could be the chances of this year:
I reckon that the gains on the stock market will continue this year, maybe a bit stronger than 2012. The fiscal cliff solution - which now seems to appear - should lead to a strong start. The main engine of the global growth - and therefore the stock markets - will be the continuing rise of company profits. I reckon that the technological progress will accelerate in 2013 as it does every year (Moore´s law).
The US consumer spending will stay the engine of the global economy fueled by the continuing healing of the job market. China will gather speed and Europa will finally end the recession driven by climbing exports to the US, China and other emerging markets.
Many are still under-invested, including the majority of the big funds. A lot of money idles now in bonds and money market funds, with almost zero interest. A rising stock market could set many fund managers under performance pressure. They would have to buy stocks otherwise they would miss the upswing.
Hence I expect that the S&P 500 will close north of 1.700 by the end of the year and we should get a rally of at least 20%.
Happy New Year and much luck to all of you!